What changed in this filing

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Item 1. Financial Statements

2025-05-14 compared with 2024-11-13 · 830 added, 949 removed, 128 unchanged (93% of the section changed)

Financial Statements

THERAPEUTICS, INC.

ORUKA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

September 30,

Current assets:

Cash and cash equivalents

Subscription receivable

Marketable securities, current

Prepaid expenses and other current assets

Total current assets

Marketable securities, long-term

Property and equipment, net

Operating lease right-of-use asset

Operating lease right-of-use assets

Other non-current assets

10 unchanged sentences

Commitment and contingencies (Note 11)

Series A convertible preferred stock, $ 0.0001 par value;

no shares and 20,000,000 shares authorized as of September 30, 2024 and February 6, 2024, respectively;

no shares issued and outstanding as of September 30, 2024 and February 6, 2024;

liquidation preference of $ 0 as of September 30, 2024 and February 6, 2024

Series A non-voting convertible preferred stock, $ 0.001 par value;

2,439 and no shares authorized as of September 30, 2024 and February 6, 2024, respectively;

2,439 and no shares issued and outstanding as of September 30, 2024 and February 6, 2024, respectively

Stockholders’ equity:

Series B non-voting convertible preferred stock, $ 0.001 par value;

251,504 and no shares authorized as of September 30, 2024 and February 6, 2024, respectively;

137,138 and no shares issued and outstanding as of September 30, 2024 and February 6, 2024, respectively

Common stock, $ 0.001 and $ 0.001 par value as of September 30, 2024 and February 6, 2024, respectively;

545,000,000 and 65,000,000 shares authorized, 34,998,550 and 3,197,975 shares issued and outstanding as of September 30, 2024 and February 6, 2024, respectively

251,504 shares authorized as of March 31, 2025 and December 31, 2024;

137,138 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Common stock, $ 0.001 par value;

545,000,000 shares authorized, 37,440,510 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

1 unchanged sentence

Total liabilities, convertible preferred stock and stockholders’ equity

accompanying notes are an integral part of these condensed consolidated financial statements.

THERAPEUTICS, INC.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

ORUKA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

Three Months Ended

September 30,

(Inception) to

September 30,

Operating expenses

6 unchanged sentences

Interest expense (3)

Other expense, net

Total other income (expense), net

Net loss and comprehensive loss

Net change in unrealized gains (losses) on marketable securities

Comprehensive loss

Net loss per share attributable to common stockholders, basic and diluted

Net loss per share attributable to Series A non-voting convertible preferred stockholders, basic and diluted

$ ( 1,461.10 )

$ ( 6,077.25 )

Net loss per share attributable to Series B non-voting convertible preferred stockholders, basic and diluted

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

Weighted-average shares used in computing net loss per share attributable to Series A non-voting convertible preferred stockholders, basic and diluted

Weighted-average shares used in computing net loss per share attributable to Series B non-voting convertible preferred stockholders, basic and diluted

(1) Includes related party amount of $ 13,537 for the three months ended September 30, 2024 and $ 33,967 for the period from February 6, 2024 (inception) to September 30, 2024

(2) Includes related party amount of $ 71 for the three months ended September 30, 2024 and $ 1,339 for the period from February 6, 2024 (inception) to September 30, 2024

(3) Includes related party amount of $ 504 for the three months ended September 30, 2024 and $ 1,468 for the period from February 6, 2024 (inception) to September 30, 2024

accompanying notes are an integral part of these condensed consolidated financial statements.

THERAPEUTICS, INC.

(1) Includes related party amounts of $ 2,122 for the three months ended March 31, 2025 and $ 5,051 for the period from February 6, 2024 (inception) to March 31, 2024

(2) Includes related party amounts of $ 110 for the three months ended March 31, 2025 and $ 848 for the period from February 6, 2024 (inception) to March 31, 2024

(3) Includes related party amounts of nil for the three months ended March 31, 2025 and $ 214 for the period from February 6, 2024 (inception) to March 31, 2024

The accompanying notes are an integral part of

these condensed consolidated financial statements.

ORUKA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

Convertible Preferred Stock

Preferred Stock

Accumulated Other Comprehensive

Stockholders’

Balances as of December 31, 2024

Stock-based compensation expense

Net change in unrealized gains (losses) on marketable securities

Balances as of March 31, 2025

$ ( 104,723 )

Convertible Preferred Stock

Series B Non-Voting

Convertible Preferred Stock

Accumulated Other Comprehensive

Stockholders ’

of February 6, 2024 (inception)

of common stock

Balances as of February 6, 2024 (Inception)

Issuance of common stock

Issuance of Series A convertible preferred stock, net of issuance costs of $69

Stock-based compensation

Stock-based compensation expense

Balances as of March 31, 2024

Stock-based compensation

Balances as of June 30,

Exchange of Series A convertible

preferred stock for Series B non-voting convertible preferred stock upon the closing of the reverse recapitalization

Conversion of convertible

notes (including accrued interest) into common stock upon the closing of the reverse recapitalization

Issuance of common stock

and pre-funded warrants in the Pre-Closing Financing,

Issuance costs of Pre-Closing

Financing and reverse recapitalization

Issuance of common stock

to former stockholders of ARCA biopharma, Inc.

in connection with the closing of the reverse recapitalization

Issuance of common stock,

Series A non-voting convertible preferred stock, and pre-funded warrants in connection with the PIPE Financing

Issuance cost of PIPE Financing

Stock-based compensation

as of September 30, 2024

accompanying notes are an integral part of these condensed consolidated financial statements.

THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of

these condensed consolidated financial statements.

ORUKA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Inception) to

September 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense

Stock-based compensation expense

Net accretion of premiums and discounts on marketable securities

Non-cash interest expense

Non-cash lease expense

Depreciation expense

Changes in operating assets and liabilities:

Subscription receivable

Prepaid expenses and other current assets

4 unchanged sentences

Related party accounts payable and other current liabilities

Accrued interest payable, related party

Net cash used in operating activities

1 unchanged sentence

Purchases of property and equipment

Net cash used in investing activities

Purchases of marketable securities

Proceeds from maturities of marketable securities

Net cash provided by investing activities

Cash flows from financing activities:

Proceeds from issuance of Pre-Merger Oruka Series A Preferred Stock, net of issuance costs paid

Proceeds from issuance of notes payable to related parties, net of issuance costs paid

Proceeds from the Pre-Closing Financing, net

Proceeds from the PIPE Financing, net

Cash acquired in connection with the reverse recapitalization

Proceeds from issuance of notes payable to related party, net of issuance costs paid

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash at beginning of period

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of non-cash operating and financing activities:

Operating lease liability arising from obtaining operating right-of-use asset

Assets acquired in connection with the reverse recapitalization

Other liabilities assumed in connection with the reverse recapitalization

Pre-Closing Financing and reverse recapitalization issuance costs included in accounts payable

PIPE Financing issuance costs included in accounts payable

PIPE Financing issuance costs included in accrued expenses and other current liabilities

Non-cash accrued interest on convertible note converted to common stock

Non-cash exchange of Pre-Merger Oruka Series A Preferred Stock for Company Series B Convertible Preferred Stock

accompanying notes are an integral part of these condensed consolidated financial statements.

THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nature of the Business and Basis of Presentation

and Basis of Presentation

Oruka Therapeutics, Inc., together with its subsidiaries (collectively,

the “Company”), formerly known as ARCA biopharma, Inc.

(“ARCA”), is an early-stage biotechnology company that

is the result of the reverse recapitalization discussed below.

Prior to the reverse recapitalization, the private company Oruka Therapeutics,

(“Pre-Merger Oruka”) was established and incorporated under the laws of the state of Delaware on February 6, 2024

(referred to in the Notes as the inception of the Company).

The Company is headquartered in Menlo Park, California.

The Company is focused

on developing biologics to optimize the treatment of inflammatory skin diseases.

These condensed consolidated financial statements reflect, in the opinion

of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial

position as of September 30, 2024, and its results of operations for the three months ended September 30, 2024 and from February 6, 2024

(inception) to September 30, 2024, and cash flows for the period from February 6, 2024 (inception) to September 30, 2024.

The condensed

balance sheet as of February 6, 2024, included in the condensed consolidated balance sheets was derived from the Company’s audited

financial statements.

The condensed consolidated financial statements and accompanying notes are prepared in accordance with United States

(“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial reporting and the rules and regulations

Securities and Exchange Commission (the “SEC”) and therefore do not include all information and disclosures normally

included in the annual consolidated financial statements.

The results for the three months ended September

30, 2024 and the period from February 6, 2024 (inception) to September 30, 2024 are not necessarily indicative of results expected for

the full fiscal year or any subsequent interim period.

The condensed consolidated financial statements include the financial statements

of its wholly-owned subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

Recapitalization and Pre-Closing Financing

On August 29, 2024, the Company consummated the

previously announced business combination (“Closing”) pursuant to that certain Agreement and Plan of Merger and Reorganization,

dated April 3, 2024 (the “Merger Agreement”), by and among ARCA, Atlas Merger Sub Corp, a wholly owned subsidiary of ARCA

(“First Merger Sub”), Atlas Merger Sub II, LLC, a wholly owned subsidiary of ARCA (“Second Merger Sub”) and Pre-Merger

Oruka, pursuant to which, among other matters, Pre-Merger Oruka merged with and into First Merger Sub, with Pre-Merger Oruka continuing

as a wholly owned subsidiary of ARCA and the surviving corporation of the merger (“First Merger”) and following that, Pre-Merger

Oruka then merged with and into Second Merger Sub, with Second Merger Sub being the surviving entity of the second merger (the “Second

Merger” and together with the First Merger, the “Merger”).

Following consummation of the Merger, the Company effected

a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the common stock, par value $ 0.001 per share, of the Company

(“Company Common Stock”), which became effective on September 3, 2024.

The Company Common Stock commenced trading on a post-Reverse

Stock Split, post-Merger basis at the opening of trading on September 3, 2024.

Second Merger Sub changed its corporate name to “Oruka

Therapeutics Operating Company, LLC” and ARCA changed its name to “Oruka Therapeutics, Inc.” The Company is led by the

Pre-Merger Oruka management team and remains focused on developing biologics to optimize the treatment of inflammatory skin diseases.

Immediately prior to the execution and delivery of the Merger Agreement

on April 3, 2024, certain new and existing investors of Pre-Merger Oruka entered into a subscription agreement with Pre-Merger Oruka (the

“Subscription Agreement”), pursuant to which, and on the terms and subject to the conditions of which, immediately prior to

the Closing, those investors purchased shares of common stock of Pre-Merger Oruka (“Pre-Merger Oruka Common Stock”) and Pre-Merger

Oruka pre-funded warrants for gross proceeds of approximately $ 275.0 million (which includes $ 25.0 million of proceeds previously received

from the issuance of the Convertible Note (as defined in Note 6) and accrued interest on such note which converted to shares of Pre-Merger

Oruka Common Stock) (the “Pre-Closing Financing”).

The Company incurred transaction costs of $ 20.5 million which was recorded

as a reduction to additional paid-in capital in the unaudited condensed consolidated financial statements.

At the Closing, the shares

of Pre-Merger Oruka Common Stock and Pre-Merger Oruka pre-funded warrants issued pursuant to the Subscription Agreement were converted

into shares of Company Common Stock and pre-funded warrants of Company Common Stock in accordance with the Exchange Ratio (defined below).

In accordance with an Exchange Ratio determined

by terms of the Merger Agreement and upon the effective time of the First Merger (the “First Effective Time”), (i) each then-issued

and outstanding share of Pre-Merger Oruka Common Stock including outstanding and unvested Pre-Merger Oruka restricted stock and shares

of Pre-Merger Oruka Common Stock issued in connection with the Subscription Agreement, were converted into the right to receive a number

of shares of Company Common Stock, equal to the Exchange Ratio of 6.8569 shares of Company Common Stock, which were subject to the same

vesting provisions as those immediately prior to the Merger, (ii) each share of Pre-Merger Oruka Series A convertible preferred stock,

par value $ 0.0001 (“Pre-Merger Oruka Series A Preferred Stock”), outstanding immediately prior to the First Effective Time

was converted into the right to receive a number of shares of ARCA Series B non-voting convertible preferred stock, par value $ 0.001 per

share (“Company Series B Preferred Stock”), which are convertible into shares of Company Common Stock, at a conversion ratio

of approximately 83:3332:1 (iii) each outstanding option to purchase Pre-Merger Oruka Common Stock was converted into an option to purchase

shares of Company Common Stock, (iv) each outstanding warrant to purchase shares of Pre-Merger Oruka Common Stock was converted into a

warrant to purchase shares of Company Common Stock, and (v) each share of Company Common Stock issued and outstanding at the First Effective

Time remain issued and outstanding in accordance with its terms and such shares.

Subsequent to the close of the merger, the common stock

shares were then, subject to the reverse stock split of 1-for-12 effected on September 3, 2024.

Net loss per share for periods prior to

the close of the reverse recapitalization has been revised to reflect the exchange ratio.

After applying the exchange ratio and the reverse

stock split, net loss per share for the periods from February 6, 2024 (inception) to March 31, 2024 and for three months ended June 30,

2024 and from February 6, 2024 (inception) to June 30, 2024 are $( 2.21 ), $( 6.96 ), and $( 9.17 ), respectively.

As part of the Pre-Closing Financing and the Closing,

investors in the Pre-Closing Financing received 22,784,139 shares of Company Common Stock in exchange for 39,873,706 shares of Pre-Merger

Oruka Common Stock (which includes the issuance of 2,722,207 shares of Company Common Stock in exchange for 4,764,032 shares of Pre-Merger

Oruka Common Stock on the conversion of Convertible Note along with the accrued interest through the conversion date) and 5,522,207 Company

pre-funded warrants in exchange for 9,664,208 Pre-Merger pre-funded warrants.

The Merger was accounted for as a reverse recapitalization

in accordance with U.S.

Under this method of accounting, Pre-Merger Oruka was deemed to be the accounting acquirer for financial

reporting purposes.

This determination was primarily based on the fact that, immediately following the Merger:

(i) Pre-Merger Oruka stockholders

own a substantial majority of the voting rights in the combined company;

(ii) Pre-Merger Oruka’s largest stockholders retain the

largest interest in the combined company;

(iii) Pre-Merger Oruka designated a majority of the initial members of the board of directors

of the combined company;

and (iv) Pre-Merger Oruka’s executive management team became the management team of the combined company.

Supplemental disclosures of non-cash operating and financing activities:

Deferred offering costs in accrued expenses and other current liabilities

The accompanying notes are an integral part of

these condensed consolidated financial statements.

ORUKA THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of the Business and Basis of Presentation

Background and Basis of Presentation

Oruka Therapeutics, Inc.,

together with its subsidiaries (collectively, the “Company”), formerly known as ARCA biopharma, Inc.

is a clinical-stage biopharmaceutical company that is the result of the reverse recapitalization discussed below.

Prior to the reverse

recapitalization, the private company Oruka Therapeutics, Inc.

(“Pre-Merger Oruka”) was established and incorporated under

the laws of the state of Delaware on February 6, 2024 (referred to in the Notes as the inception of the Company).

The Company is

headquartered in Menlo Park, California.

The Company is led by the Pre-Merger Oruka management team and is focused on developing biologics

for psoriasis and other inflammatory and immunology indications.

The condensed consolidated

financial statements and accompanying notes are prepared in accordance with United States (“U.S.”) generally accepted accounting

principles (“GAAP”) for interim financial reporting and the rules and regulations of the U.S.

Securities and Exchange Commission

(the “SEC”) and therefore do not include all information and disclosures normally included in the annual consolidated financial

The accompanying condensed consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries.

Intercompany balances and transactions have been eliminated in consolidation.

Certain information and footnote

disclosures normally included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant

to such rules and regulations.

Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited

financial statements and the related notes thereto for the period ended December 31, 2024 included in the Company’s Annual Report

on Form 10-K filed with the SEC on March 6, 2025 (the “Annual Report”).

The information as of December 31, 2024, included

in the condensed consolidated balance sheets was derived from the Company’s audited financial statements.

These unaudited interim

condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial

statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for a

fair statement of the Company’s condensed consolidated financial statements.

The results for the three

months ended March 31, 2025 are not necessarily indicative of results that may be expected for the year ending December 31, 2025 or for

any other interim period or for any other future year.

Reverse Recapitalization, Pre-Closing Financing, and Reverse Stock Split

On August 29, 2024 (the “Closing”),

the Company completed the acquisition (the “Merger”) of Pre-Merger Oruka pursuant to an Agreement and Plan of Merger and Reorganization,

dated as of April 3, 2024 (the “Merger Agreement”).

Following the transactions contemplated by the Merger Agreement, on August

29, 2024, the Company changed its name from “ARCA biopharma, Inc.” to “Oruka Therapeutics, Inc.” and the Company

effected a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the common stock, par value $ 0.001 per share, of the

Company (“Company Common Stock”), which became effective on September 3, 2024.

All references to common stock, options to

purchase common stock, outstanding common stock warrants, common stock share data, per share data, and related information contained in

the condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for

all periods presented, unless otherwise specifically indicated or the context otherwise requires.

Immediately prior to the execution and delivery

of the Merger Agreement, certain new and existing investors of Pre-Merger Oruka entered into a subscription agreement with Pre-Merger

Oruka (that was subsequently amended and restated in July 2024, the “Subscription Agreement”), pursuant to which, and on the

terms and subject to the conditions of which, immediately prior to the Closing, those investors purchased shares of common stock of Pre-Merger

Oruka (“Pre-Merger Oruka Common Stock”) and Pre-Merger Oruka pre-funded warrants for gross proceeds of approximately $ 275.0

million (which includes $ 25.0 million of proceeds previously received from the issuance of the Convertible Note (as defined in Note 6)

and accrued interest on such note which converted to shares of Pre-Merger Oruka Common Stock) (the “Pre-Closing Financing”).

The Company incurred transaction costs of $ 20.5 million which were recorded as a reduction to additional paid-in capital in the condensed

consolidated financial statements.

In connection with the Closing, the shares of Pre-Merger Oruka Common

Stock were converted into shares of Company Common Stock and pre-funded warrants of Company Common Stock in accordance with the Exchange

Ratio (as defined below and determined by the terms of the Merger Agreement).

Moreover, as part of the Closing, (i) then-issued and

outstanding share of Pre-Merger Oruka Common Stock (including outstanding and unvested Pre-Merger Oruka restricted stock and shares of

Pre-Merger Oruka Common Stock issued in connection with the Subscription Agreement) were converted into the right to receive a number

of shares of Company Common Stock, equal to the exchange ratio of 6.8569 shares of Company Common Stock (the “Exchange Ratio”),

which were subject to the same vesting provisions as those immediately prior to the Merger;

(ii) each share of Pre-Merger Oruka Series

A convertible preferred stock, par value $ 0.0001 (“Pre-Merger Oruka Series A Preferred Stock”) was converted into the right

to receive a number of shares of ARCA Series B non-voting convertible preferred stock, par value $ 0.001 per share (“Company Series

B Preferred Stock”), which are convertible into shares of Company Common Stock at a conversion ratio of approximately 83.3332:1

after the Reverse Stock Split, (iii) each outstanding option to purchase Pre-Merger Oruka Common Stock was converted into an option to

purchase shares of Company Common Stock, and (iv) each outstanding warrant to purchase shares of Pre-Merger Oruka Common Stock was converted

into a warrant to purchase shares of Company Common Stock.

The Merger was accounted

for as a reverse recapitalization in accordance with U.S.

Under this method of accounting, Pre-Merger Oruka was deemed to be the

accounting acquirer for financial reporting purposes.

This determination was primarily based on the fact that, immediately following the

(i) Pre-Merger Oruka stockholders own a substantial majority of the voting rights in the combined company;

(ii) Pre-Merger Oruka’s

largest stockholders retain the largest interest in the combined company;

(iii) Pre-Merger Oruka designated a majority of the initial

members of the board of directors of the combined company;

and (iv) Pre-Merger Oruka’s executive management team became the management

team of the combined company.

Accordingly, for accounting purposes:

(i) the Merger was treated as the equivalent of Pre-Merger Oruka issuing stock to acquire the net

assets of ARCA, and (ii) the reported historical operating results of the combined company prior to the Merger are those of Pre-Merger

Additional information regarding the Merger is included in Note 3.

Reverse Stock Split

On September 3, 2024, the Company effected the

Reverse Stock Split, a 1-for-12 reverse stock split of Company Common Stock.

The par value per share and the number of authorized shares

were not adjusted as a result of the Reverse Stock Split.

The shares of Company Common Stock underlying outstanding stock options, common

stock warrants and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately

increased in accordance with the terms of the agreements governing such securities.

All references to common stock, options to purchase

common stock, outstanding common stock warrants, common stock share data, per share data, and related information contained in the condensed

consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods

presented, unless otherwise specifically indicated or the context otherwise requires.

(a) the Merger was treated as the equivalent of Pre-Merger Oruka issuing

stock to acquire the net assets of ARCA, and (b) the reported historical operating results of the combined company prior to the Merger

are those of Pre-Merger Oruka.

As part of the reverse recapitalization, the Company acquired a cash balance of $ 4.94 million from ARCA.

PIPE Financing

On September 11, 2024, the Company entered into

a Securities Purchase Agreement for a private placement (the “PIPE Financing”) with certain institutional and accredited investors.

On September 11, 2024, the

Company entered into a Securities Purchase Agreement for a private placement (the “PIPE Financing”) with certain institutional

and accredited investors.

The closing of the PIPE Financing occurred on September 13, 2024.

Pursuant to the Securities Purchase Agreement,

the investors purchased an aggregate of 5,600,000 shares of Company Common Stock at a purchase price of $ 23.00 per share, an aggregate

of 2,439 shares of the Company’s Series A non-voting convertible preferred stock, par value $ 0.001 per share (“Company Series

A Preferred Stock”), at a purchase price of $ 23,000.00 per share (each Company Series A Preferred Stock is convertible into 1,000

shares of Company Common Stock), and pre-funded warrants to purchase an aggregate of 680,000 shares of Company Common Stock at a purchase

price of $ 22.999 per pre-funded warrant, for aggregate net proceeds of approximately $ 188.7 million (net of issuance costs of $ 11.8 million).

and Going Concern

its inception, the Company has devoted substantially all of its resources to advancing the development of its portfolio of programs,

organizing and staffing the Company, business planning, raising capital, and providing general and administrative support for these operations.

Current and future programs will require significant research and development efforts, including preclinical and clinical trials, and

regulatory approvals to commercialization.

Until such time as the Company can generate significant revenue from product sales, if ever,

the Company expects to finance its operating activities through a combination of equity offerings and debt financings.

The Company has not generated any revenue from

product sales or other sources and has incurred significant operating losses and negative cash flows from operations since inception.

The Company has incurred a net loss of $ 28.6 million for the three months ended September 30, 2024 and $ 57.9 million during the

period from February 6, 2024 (inception) to September 30, 2024.

For the period from February 6, 2024 (inception) to September 30,

2024, the Company used net cash of $ 39.0 million for its operating activities.

As of September 30, 2024, the Company had cash

and cash equivalents of $ 410.9 million.

The Company’s management expects that the existing cash and cash equivalents will be sufficient

to fund the Company’s operating plans for at least twelve months from the date these condensed consolidated financial statements

The Company expects that its research and development and general and administrative costs will continue to increase significantly,

including in connection with conducting future pre-clinical activities and clinical trials and manufacturing for its existing product

candidates and any future product candidates to support commercialization and providing general and administrative support for its operations,

including the costs associated with operating as a public company.

The Company’s ability to access capital when needed is not assured

and, if capital is not available to the Company when, and in the amounts needed, the Company may be required to significantly curtail,

delay or discontinue one or more of its research or development programs or the commercialization of any product candidate, or be unable

to expand its operations or otherwise capitalize on the Company’s business opportunities, as desired, which could materially harm

the Company’s business, financial condition and results of operations.

Pursuant to the Securities

Purchase Agreement, the investors purchased an aggregate of 5,600,000 shares of Company Common Stock at a purchase price of $ 23.00 per

share, an aggregate of 2,439 shares of the Company’s Series A non-voting convertible preferred stock, par value $ 0.001 per share

(“Company Series A Preferred Stock”), at a purchase price of $ 23,000.00 per share (each share of Company Series A Preferred

Stock was convertible into 1,000 shares of Company Common Stock), and pre-funded warrants to purchase an aggregate of 680,000 shares of

Company Common Stock at a purchase price of $ 22.999 per pre-funded warrant, for aggregate net proceeds of approximately $ 188.7 million

(net of issuance costs of $ 11.9 million).

In November 2024, the 2,439 shares of the Company Series A Preferred Stock were converted

to 2,439,000 shares of Company Common Stock.

Liquidity and Going Concern

Since its inception, the

Company has devoted substantially all of its resources to advancing the development of its portfolio of programs, organizing and staffing

the Company, business planning, raising capital, and providing general and administrative support for these operations.

Current and future

programs will require significant research and development efforts, including preclinical and clinical trials, and regulatory approvals

to commercialization.

Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects

it will need additional financing to fund its operating activities.

The Company has not generated

any revenue from product sales or other sources and has incurred significant operating losses and negative cash flows from operations

since inception.

For the three months ended March 31, 2025, the Company incurred a net loss of $ 21.0 million and used net cash of $ 20.9

million for its operating activities.

As of March 31, 2025, the

Company had cash, cash equivalents, and marketable securities of $ 373.0 million.

The Company’s management expects that the existing

cash, cash equivalents, and marketable securities will be sufficient to fund the Company’s operating plans for at least twelve months

from the date these condensed consolidated financial statements were issued.

The Company expects that its research and development and

general and administrative costs will continue to increase significantly, including in connection with conducting pre-clinical activities

and clinical trials and manufacturing for its existing product candidates and any future product candidates to support commercialization

and providing general and administrative support for its operations, including the costs associated with operating as a public company.

The Company’s ability to access capital when needed is not assured and, if capital is not available to the Company when, and in

the amounts needed, the Company may be required to significantly curtail, delay, or discontinue one or more of its research or development

programs or the commercialization of any product candidate, or be unable to expand its operations or otherwise capitalize on the Company’s

business opportunities, as desired, which could materially harm the Company’s business, financial condition and results of operations.

Summary of Significant Accounting

The Company’s significant accounting policies are detailed in

the Notes titled “1.

Nature of the Business and Basis of Presentation” and “2.

Summary of Significant Accounting Policies”

The preparation of the Company’s condensed consolidated financial

statements in conformity with U.S.

GAAP requires management to make estimates, assumptions, and judgments that affect the reported

amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements

and the reported amounts of income and expenses during the reporting periods.

Significant estimates and assumptions reflected within these

condensed consolidated financial statements include but are not limited to research and development expenses and related prepaid or accrued

costs and the valuation of stock-based compensation awards and related expenses.

The Company bases its estimates on known trends and other

market-specific or other relevant factors that it believes to be reasonable under the circumstances.

On an ongoing basis, management evaluates

its estimates, as there are changes in circumstances, facts, and experience.

Actual results could differ materially from those estimates

or assumptions.

Concentrations

of Credit Risk and Other Risks and Uncertainties

Company’s cash and cash equivalents are maintained with financial institutions in the United States of America.

Cash balances

are held at financial institutions and account balances may exceed federally insured limits.

To date, the Company has not experienced

any losses on its cash and cash equivalents and periodically evaluates the creditworthiness of its financial institutions.

The Company manages credit risk associated with its investment portfolio

through its investment policy, which limits investments to high-quality issuers and limits the amount of its portfolio that can be invested

in a single issuer.

The Company is dependent on third-party organizations

to research, develop, manufacture, and process its product candidates for its development programs, including its two most advanced programs,

ORKA-001 and ORKA-002.

The Company expects to continue to be dependent on a small number of manufacturers to supply it with its requirements

for all products.

The Company’s research and development programs could be adversely affected by a significant interruption in the

supply of the necessary materials.

A significant amount of the Company’s research and development activities are performed under

its agreements with Paragon Therapeutics, Inc.

(“Paragon”) (see Note 10).

and Cash Equivalents

Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to

be cash equivalents.

The cash equivalents were comprised of investments in money market funds.

Issuance Costs

Debt issuance costs incurred in connection with

the Convertible Note (see Note 6) are recorded as a reduction of the carrying value of the notes payable liability on the Company’s

balance sheet and are amortized to interest expense over the term of the loan using the effective interest method.

Subscription Receivable

Company accounts for any notes received in exchange for common stock as a subscription receivable, provided the note underlying the receivable

is paid prior to the date the financial statement is available to be issued.

Value Measurements

assets and liabilities are carried at fair value under U.S.

Fair value is defined as the exchange price that would be

received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability

in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize

the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are

to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered

observable and the last is considered unobservable:

— Quoted prices in active markets that are identical assets or liabilities.

Level 2 — Observable

inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices

in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated

by observable market data.

Level 3 — Unobservable

inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities,

including pricing models, discounted cash flow methodologies, and similar techniques.

Company’s cash equivalents are carried at fair value, determined according to the fair value hierarchy described above (see Note

The carrying values of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses and other

current liabilities approximate their fair values due to their relatively short maturity period.

and Equipment

and equipment are stated at cost less accumulated depreciation.

Depreciation expense is recognized using the straight-line method over

the estimated useful life of each asset as follows:

Estimated Useful Life

Furniture and fixtures

Computer and office equipment

Classification

of Convertible Preferred Stock

Prior to the reverse recapitalization, the Company

had classified its Pre-Merger Oruka Series A Preferred Stock outside of stockholders’ equity (deficit) on the Company’s condensed

consolidated balance sheet because the holders of such stock have certain liquidation rights in the event of a deemed liquidation event

that, in certain situations, is not solely within the control of the Company and would require the redemption of the then-outstanding

convertible preferred stock.

Upon the closing of the Merger, the Company converted

its Pre-Merger Oruka Series A Preferred Stock to Company Series B Preferred Stock and has classified the Company Series B Preferred Stock

within stockholders’ equity (deficit) on its condensed consolidated balance sheet because the Company Series B Preferred Stock is

not redeemable or puttable to the Company by the holder under any circumstances.

In connection with the PIPE Financing (see Note

1) the Company issued Company Series A Preferred Stock, and has classified the Company Series A Preferred Stock outside of stockholders’

equity (deficit) on the Company’s condensed consolidated balance sheet because the holders of such stock have certain rights (see

Note 7) that, in certain situations, is not solely within the control of the Company and would require the redemption of the then-outstanding

convertible preferred stock.

to Related Party

The Company accounted for the Convertible Note

(as defined in Note 6) at amortized cost.

The Company considered if optional conversion features are required to be bifurcated and separately

accounted for as a derivative.

Costs related to the issuance of the Convertible Note were recorded as a debt discount, amortized over

the term of the Convertible Note (see Note 6) and were accounted as interest expense in other income (expenses) within the condensed

consolidated statements of operations and comprehensive loss using the effective interest method.

At the effective time of the Merger,

shares of Pre-Merger Oruka Common Stock issued pursuant to the conversion of the Convertible Note (including accrued interest) automatically

converted into shares of Company Common Stock (see Note 1).

and Development Contract Costs Accruals

The Company records the costs associated with

research studies and manufacturing development as incurred.

These costs are a significant component of the Company’s research and

development expenses, with a substantial portion of the Company’s ongoing research and development activities conducted by third-party

service providers, including contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”),

and the Company’s related-party Paragon (see Note 10).

The Company accrues for expenses resulting from

obligations under its two antibody discovery and option agreements (the “Option Agreements”) (see Note 10), by and among Paragon,

Paruka Holding LLC (“Paruka”), an entity formed by Paragon as a vehicle to hold equity in the Company, and the Company as

well as agreements with CROs, CMOs, and other outside service providers for which payment flows do not match the periods over which materials

or services are provided to the Company.

Accruals are recorded based on estimates of services received and efforts expended pursuant to

agreements established with Paragon, CROs, CMOs, and other outside service providers.

These estimates are typically based on contracted

amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers

as to the progress or stage of completion of the services.

The Company makes significant judgments and estimates in determining the accrual

balance in each reporting period.

If advance payments are made to Paragon, a CRO, CMO, or outside service provider, the payments will

be recorded as a prepaid asset which will be expensed as the contracted services are performed.

Changes in these estimates that result

in material changes to the Company’s accruals could materially affect the Company’s results of operations.

As of September

30, 2024, the Company has not experienced any material deviations between accrued and actual research and development expenses.

the lease commencement date, when control of the underlying asset is transferred from the lessor to the Company, the Company classifies

a lease as either an operating or finance lease and recognizes a right-of-use (“ROU”) asset and a current and non-current

lease liability, as applicable, in the balance sheet if the lease has a term greater than one year .

Lease terms may include options to

extend or terminate the lease when it is reasonably certain that the Company will exercise its option.

the lease commencement date, operating lease liabilities and their corresponding ROU assets are recorded at the present value of future

minimum lease payments over the expected remaining lease term.

The Company determines the present value of lease payments using the implicit

rate, if it is readily determinable, or the risk-free discount rate for a period comparable with that of the lease term.

For operating

leases, lease expense for lease payments is recognized on a straight-line basis over the lease term.

For finance leases, lease expense

includes amortization expense of the ROU asset recognized on a straight-line basis over the lease term and interest expense recognized

on the finance lease liability.

In addition, certain adjustments to the ROU asset may be required for items such as lease prepayments,

incentives received or initial direct costs.

As of September 30, 2024, the Company has one operating lease and no finance leases.

Company accounts for lease and non-lease components related to operating leases as a single lease component.

The Company has elected

that costs associated with leases having an initial term of 12 months or less are recognized in the condensed consolidated statement

of operations and comprehensive loss on a straight-line basis over the lease term and are not recorded on its condensed consolidated

balance sheets.

Variable lease expense is recognized as incurred and consists primarily of real estate taxes, utilities, and other office

space related expenses.

Company operates and manages its business as a single segment for the purposes of assessing performance and making operating decisions.

The Company’s chief executive officer, who is the chief operating decision maker (the “CODM”), reviews the Company’s

financial information on an aggregated basis for purposes of evaluating financial performance and allocating resources.

and Development Costs

Research and development costs are expensed as

Research and development costs include salaries and bonuses, stock-based compensation, employee benefits, and external costs

of vendors and consultants engaged to conduct research and development activities, as well as allocated human resource costs, information

technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation.

Nonrefundable

advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid

expenses on the accompanying condensed consolidated balance sheet.

The prepaid amounts are expensed as the related goods are delivered

or the services are performed, or when it is no longer expected that the goods will be delivered, or the services rendered.

If nonrefundable

advance payments represent a one-time cost for obtaining goods or services, with anticipated benefits to be utilized within a year of

period end, the payment is expensed immediately.

and Administrative Expenses

General and administrative expenses consist primarily

of salaries and bonuses, stock-based compensation, employee benefits, finance and administration costs, patent and intellectual property

costs, professional fees, as well as allocated human resource costs, information technology costs, and facility-related costs, including

rent, maintenance, utilities and depreciation.

and Contingencies

The Company is subject to contingent liabilities,

such as legal proceedings and claims, that arise in the ordinary course of business activities.

The Company accrues for loss contingencies

when losses become probable and are reasonably estimable.

If the reasonable estimate of the loss is a range and no amount within the range

is a better estimate, the minimum amount of the range is recorded as a liability on the balance sheet.

The Company does not accrue for

contingent losses that, in its judgment, are considered to be reasonably possible, but not probable;

however, it discloses the range of

reasonably possible losses.

As of September 30, 2024, no liabilities were recorded for loss contingencies (see Note 11).

Company measures all stock-based awards granted to employees, directors, and non-employees in the form of stock options to purchase shares

of its common stock, based on the fair value of the awards on the date of grant using the Black-Scholes option-pricing model.

measures restricted common stock awards (“RSAs”) using the difference, if any, between the purchase price per share of the

award and the fair value of the Company’s common stock at the date of grant.

Company grants stock options, restricted stock awards, and warrants that are subject to service or performance-based vesting conditions.

Compensation expense for awards to employees and directors with service-based vesting conditions is recognized using the straight-line

method over the requisite service period, which is generally the vesting period of the respective award.

Compensation expense for awards

to non-employees with service-based vesting conditions is recognized in the same manner as if the Company had paid cash in exchange for

the goods or services, which is generally over the vesting period of the award.

Forfeitures are accounted for as they occur.

reporting date, the Company estimates the probability that specified performance criteria will be met and does not recognize compensation

expense until it is probable that the performance-based vesting condition will be achieved.

The Company has issued stock options, warrants,

and RSAs with service-based and performance-based vesting conditions.

Company recognizes the compensation expense for the option to purchase common stock under the Employee Stock Purchase Plan (“ESPP”),

based on the fair value of the common stock estimated using the closing price of the Company’s common stock as reported on the

date of offering, less the purchase discount percentage provided for in the plan.

Company classifies stock-based compensation expense in its condensed consolidated statement of operations and comprehensive loss in the

same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments

are classified.

Net Loss per Share Attributable to Stockholders

Basic and diluted net loss attributable to stockholders

per share is presented in conformity with the two-class method required for participating securities (Pre-Merger Oruka Series A Preferred

Basic earnings per share is computed by dividing net income available to each class of shares by the weighted-average number of

shares of common stock and participating securities outstanding during the period.

Pre-funded warrants were included as the exercise price

is negligible and these warrants are fully vested and exercisable.

Company Series A Preferred Stock and Company Series B Preferred Stock

share the same characteristics as Common Stock and have no substantive preference attributed to them and, accordingly, have been considered

as classes of Common Stock in the computation of net loss per share regardless of their legal form.

Net loss is allocated to common stock based on

its proportional ownership on an as-converted basis.

Net loss is not allocated to participating securities as they do not have an obligation

to fund losses.

The weighted-average number of shares outstanding of common stock reflects changes in ownership over the periods presented.

See Note 7— Convertible Preferred Stock and Stockholders’ Equity.

Diluted net loss per share is computed by dividing

the net loss attributable to stockholders adjusted for income (expenses), net of tax, related to any diluted securities, by the weighted-average

number of shares of common stock and potentially dilutive securities outstanding for the period.

For purposes of this calculation, stock

options to purchase common stock, employee warrants to purchase common stock, and unvested RSAs are considered potential dilutive common

Company generated a net loss for the periods presented.

Accordingly, basic and diluted net loss per share is the same because the inclusion

of the potentially dilutive securities would be anti-dilutive.

Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax

Deferred tax assets and liabilities are determined based on the differences between the financial statement basis and tax basis

of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse.

in deferred tax assets and liabilities are recorded in the provision for income taxes.

The Company assesses the likelihood that its deferred

tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence,

that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established

through a charge to income tax expense.

The potential for recovery of deferred tax assets is evaluated by estimating the future taxable

profits expected and considering prudent and feasible tax planning strategies.

Company accounts for uncertainty in income taxes recognized in the condensed consolidated financial statements by applying a two-step

process to determine the amount of tax benefit to be recognized.

First, the tax position must be evaluated to determine the likelihood

that it will be sustained upon external examination by the taxing authorities.

If the tax position is deemed more likely than not to

be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the condensed consolidated financial

The amount of the benefit that may be recognized is the largest amount that has a greater than 50 % likelihood of being realized

upon ultimate settlement.

The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits,

that are considered appropriate as well as the related net interest and penalties.

The Company had accrued no amounts for interest or

penalties related to uncertain tax positions as of September 30, 2024.

Issued Accounting Pronouncements

In November 2023, the Financial Accounting

Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting ( Topic 280 ) :

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which enhances the segment disclosure requirements

for public entities on an annual and interim basis.

Under this proposal, public entities will be required to disclose significant segment

expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss.

Additionally, current

annual disclosures about a reportable segment’s profit or loss and assets will be required on an interim basis.

Entities will also

be required to disclose information about the CODM’s title and position at the Company along with an explanation of how the CODM

uses the reported measures of segment profit or loss in their assessment of segment performance and deciding how to allocate resources.

Finally, ASU 2023-07 requires all segment disclosures for public entities that have only a single reportable segment.

The amendments

in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years

beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of

this ASU on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09,

Income Taxes (Topic 740):

of the Company’s Annual Report.

The Company uses the same accounting policies in preparing its quarterly and annual financial statements.

There have been no material changes to significant accounting policies during the three months ended March 31, 2025.

Use of Estimates

The preparation of the Company’s

condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates, assumptions, and

judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed

consolidated financial statements and the reported amounts of income and expenses during the reporting periods.

Significant estimates

and assumptions reflected within these condensed consolidated financial statements include but are not limited to research and development

expenses and related prepaid or accrued costs and the valuation of stock-based compensation awards and related expenses.

The Company bases

its estimates on known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts, and experience.

Actual results

could differ materially from those estimates or assumptions.

Recently Issued Accounting Pronouncements

In December 2023, the

FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

This ASU expands disclosures in an entity’s income

tax rate reconciliation table and disclosures regarding taxes paid both in the U.S.

This ASU expands disclosures

in an entity’s income tax rate reconciliation table and disclosures regarding taxes paid both in the U.S.

and foreign jurisdictions.

This update is effective

beginning with the Company’s 2025 fiscal year annual reporting period.

The Company is currently evaluating the impact of the adoption

of this ASU on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of

Income Statement Expenses .

This ASU requires more detailed disclosures, on an annual and interim basis, about specified categories

of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face

of the income statement.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years

beginning after December 15, 2027.

This update is effective beginning with the Company’s 2025 fiscal year annual reporting period.

The Company is currently evaluating

the impact of the adoption of this ASU on its condensed consolidated financial statements.

In November 2024, the FASB

issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

This ASU requires more detailed disclosures, on an annual and interim basis, about specified

categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented

on the face of the income statement.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within

fiscal years beginning after December 15, 2027.

Early adoption is permitted.

This ASU may be applied either prospectively or retrospectively.

is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements.

Reverse Recapitalization and Pre-Closing Financing

As described within the Reverse Recapitalization and Pre-Closing

Financing section in Note 1, on August 29, 2024, the reverse recapitalization between Pre-Merger Oruka and ARCA was consummated.

Merger was accounted for as a reverse recapitalization in accordance with U.S.

At the effective time of the Merger, substantially

all of the assets of ARCA consisted of cash and cash equivalents and other nominal non-operating assets and liabilities.

No goodwill or

intangible assets were recognized.

As part of the recapitalization, the Company acquired the assets and

liabilities listed below (in thousands):

Cash and cash equivalents

Other current assets

Accrued liabilities

Net assets acquired

The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements.

Fair Value Measurements

following tables present the Company’s fair value hierarchy for financial assets measured as of September 30, 2024 (in thousands):

Fair Value Measurements as of September 30, 2024

Financial assets:

The following tables present the Company’s

fair value hierarchy for financial assets measured as of March 31, 2025 and December 31, 2024 (in thousands):

March 31, 2025

Cash equivalents

Money market funds

Total financial assets

There were no transfers between Level 1,

Level 2, or Level 3 during the period from February 6, 2024 (inception) to September 30, 2024.

Expenses and Other Current Liabilities

expenses and other current liabilities consisted of the following (in thousands):

September 30,

government agency securities

Corporate debt securities

Commercial papers

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

treasury securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

There were no transfers in or out of Level 3 during

the three months ended March 31, 2025.

December 31, 2024

Cash equivalents

Money market funds

treasury securities

government agency securities

Commercial papers

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

treasury securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

Cash Equivalents and Marketable Securities

Cash equivalents and marketable securities, which

are classified as available-for-sale, consisted of the following as of March 31, 2025 and December 31, 2024 (in thousands):

March 31, 2025

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Cash equivalents

Money market funds

government agency securities

Corporate debt securities

Commercial papers

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

treasury securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

December 31, 2024

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Cash equivalents

Money market funds

treasury securities

government agency securities

Commercial papers

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

treasury securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

The following table summarizes the available-for-sale

securities in an unrealized loss position, aggregated by major security type and length of time in a continuous unrealized loss position,

for which an allowance for credit losses was not recorded as of March 31, 2025 and December 31, 2024 (in thousands):

March 31, 2025

Less than 12 months

12 months or longer

Unrealized Losses

Cash equivalents

Commercial papers

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Commercial papers

Corporate debt securities

Marketable securities, long-term

government agency securities

December 31, 2024

Less than 12 months

12 months or longer

Unrealized Losses

Cash equivalents

Commercial papers

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Corporate debt securities

Marketable securities, long-term

treasury securities

government agency securities

The Company evaluated its

securities for credit losses and considered the decline in market value to be primarily attributable to current economic and market conditions

and not to a credit loss or other factors.

Additionally, the Company does not intend to sell the securities in an unrealized loss position

and it is not more likely than not that the Company will be required to sell the securities before recovery of the unamortized cost basis,

which may be at maturity.

There were no material realized gains or realized losses on marketable securities for the periods presented.

Given the Company’s intent and ability to hold such securities until recovery, and the lack of significant change in credit risk

of these investments, the Company does not consider these marketable securities to be impaired as of March 31, 2025 and December 31, 2024.

As of March 31, 2025 and December 31, 2024, the Company did not record an allowance for credit losses.

The following table summarizes

the contractual maturities of the Company’s marketable securities at estimated fair value (in thousands):

Due in one year or less

Due in 1-2 years

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities

consisted of the following (in thousands):

Accrued employee compensation and benefits

2 unchanged sentences

Note Payable with Related Party

In March 2024, the Company entered into a

Series A Preferred Stock and Convertible Note Purchase Agreement (the “Purchase Agreement”) with Fairmount Healthcare Fund II,

(“Fairmount”), whereby the Company issued a convertible note (the “Convertible Note”), with an initial principal

amount of $ 25.0 million that, at the time of issuance, could be converted into Pre-Merger Oruka Series A Preferred Stock (or a series of

preferred shares that is identical in respect to the shares of preferred shares issued in its next equity financing) or shares of Pre-Merger

Oruka Common Stock in exchange for aggregate proceeds of $ 25.0 million.

The Convertible Note accrued interest at a rate of 12.0 %

At issuance, the Convertible Note required all unpaid interest and principal to mature on December 31, 2025 (the “Maturity

Date”) and prepayment was not permitted without prior written consent of Fairmount.

At issuance, the principal payment along with

the accrued interest on the Convertible Note was due in full on the Maturity Date.

Company assessed all terms and features of the Convertible Note in order to identify any potential embedded features that would require

As part of this analysis, the Company assessed the economic characteristics and risks of the embedded features.

determined that the share settled redemption feature was clearly and closely related to the debt host and did not require separate accounting.

The Company determined that the conversion options of the Convertible Note were not clearly and closely associated with a debt host.

However, these features did not meet the definition of a derivative under ASC 815, Derivatives and Hedging , and as a result,

did not require separate accounting as a derivative liability.

Company paid debt issuance costs of less than $ 0.1 million in relation to the Convertible Note.

The debt issuance costs were reflected

as a reduction of the carrying value of Convertible Note on the condensed consolidated balance sheet and were being amortized as interest

expense over the term of the Convertible Note using the effective interest method.

For the three months ended September 30, 2024 and

the period from February 6, 2024 (inception) to September 30, 2024, the Company recognized interest expenses related to the Convertible

Note of $ 0.5 million and $ 1.5 million, respectively, which includes non-cash interest expense related to the amortization of debt issuance.

Immediately prior to the completion of the Merger

(see Note 1), the Convertible Note was converted into shares of Pre-Merger Oruka Common Stock based on the aggregate principal amount

of $ 25.0 million, plus unpaid accrued interest of $ 1.5 million divided by the conversion price which was determined based upon the Company’s

fully-diluted capitalization immediately prior to the Merger.

At the effective time of the Merger, the Pre-Merger Oruka Common Stock issued

upon the conversion of the Convertible Note (including accrued interest) automatically converted into 2,722,207 shares of Company Common

As of September 30, 2024, the Convertible Note is not outstanding.

Convertible Preferred Stock and Stockholders’ Equity

In August 2024, pursuant to the Subscription Agreement and immediately

prior to the Closing, certain new and current investors purchased pre-funded warrants, which, at the effective time of the Merger,

were exercisable for 5,522,207 shares of Company Common Stock at a purchase price of approximately $ 9.70 per warrant.

After the Merger,

there are 5,522,207 pre-funded warrants outstanding and are exercisable for 5,522,207 shares of the Company Common Stock at an exercise

price of $ 0.01 per share.

In September 2024, in connection with the PIPE

Financing, the Company issued and sold 680,000 pre-funded warrants, at a purchase price of $ 22.999 per warrant, exercisable for 680,000

shares of Company Common Stock at an exercise price of $ 0.001 per share.

pre-funded warrants were recorded as a component of stockholders’ equity within additional paid-in-capital and have no expiration

As of September 30, 2024, none of the pre-funded warrants have been exercised and 6,202,207 pre-funded warrants remain outstanding.

In July 2024, Pre-Merger Oruka entered into a Subscription Agreement

that provided for, among other things, the issuance of warrants to certain of Pre-Merger Oruka’s employees, directors, and service

providers immediately prior to the closing of the Merger.

During the three months ended September 30, 2024, 3,054,358 employee warrants

In March 2024, Pre-Merger

Oruka entered into a Series A Preferred Stock and Convertible Note Purchase Agreement (the “Purchase Agreement”) with Fairmount

Healthcare Fund II, L.P.

(“Fairmount”), whereby Pre-Merger Oruka issued a convertible note (the “Convertible Note”),

with an initial principal amount of $ 25.0 million that, at the time of issuance, could be converted into Pre-Merger Oruka Series A

Preferred Stock (or a series of preferred shares that is identical in respect to the shares of preferred shares issued in its next

equity financing) or shares of Pre-Merger Oruka Common Stock in exchange for aggregate proceeds of $ 25.0 million.

The Convertible

Note accrued interest at a rate of 12.0 % per annum.

Immediately prior to the completion of the Merger (see Note 1), the Convertible Note

was converted into shares of Pre-Merger Oruka Common Stock based on the aggregate principal amount of $ 25.0 million, plus unpaid accrued

interest of $ 1.5 million divided by the conversion price which was determined based upon the Company’s fully-diluted capitalization

immediately prior to the Merger.

At the effective time of the Merger, the Pre-Merger Oruka Common Stock issued upon the conversion of

the Convertible Note (including accrued interest) automatically converted into 2,722,207 shares of Company Common Stock.

The Company assessed all

terms and features of the Convertible Note in order to identify any potential embedded features that would require bifurcation.

of this analysis, the Company assessed the economic characteristics and risks of the embedded features.

The Company determined that the

share settled redemption feature was clearly and closely related to the debt host and did not require separate accounting.

determined that the conversion options of the Convertible Note were not clearly and closely associated with a debt host.

However, these

features did not meet the definition of a derivative under ASC 815, Derivatives and Hedging, and as a result, did not require separate

accounting as a derivative liability.

The Company paid debt issuance costs of less than $ 0.1 million

in relation to the Convertible Note.

The debt issuance costs were reflected as a reduction of the carrying value of Convertible Note on

the consolidated balance sheet and were being amortized as interest expense over the term of the Convertible Note using the effective

interest method.

For the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, the Company

recognized interest expenses related to the Convertible Note of nil and $ 0.2 million, respectively, which included non-cash interest expense

related to the amortization of debt issuance of less than $ 0.1 million.

As of December 31, 2024 and March 31, 2025, the Convertible Note

is not outstanding.

Preferred Stock and Stockholders’ Equity

In August 2024, pursuant

to the Subscription Agreement and immediately prior to the Closing, certain new and current investors purchased pre-funded warrants,

which, at the effective time of the Merger, were exercisable for 5,522,207 shares of Company Common Stock at a purchase price of approximately

$ 9.70 per warrant and after the Closing, are now exercisable for 5,522,207 shares of the Company Common Stock at an exercise price of

$ 0.01 per share.

In September 2024, in connection

with the PIPE Financing, the Company issued and sold 680,000 pre-funded warrants, at a purchase price of $ 22.999 per warrant, exercisable

for 680,000 shares of Company Common Stock at an exercise price of $ 0.001 per share.

The pre-funded warrants were

recorded as a component of stockholders’ equity within additional paid-in-capital and have no expiration date.

Collectively, 6,202,207

pre-funded warrants are outstanding as of March 31, 2025 and December 31, 2024.

Employee Warrants

The Subscription Agreement

provided for, among other things, the issuance of warrants to certain of Pre-Merger Oruka’s employees and directors immediately

prior to the closing of the Merger.

During the period from February 6, 2024 (inception) to December 31, 2024, 3,054,358 employee warrants

were issued at an exercise price of $ 7.80 per warrant.

These employee warrants vest over a period of four years .

Per the terms of the

Employee Warrant Agreement, the holders of the Company’s employee warrants shall not have any of the rights or privileges of a stockholder

of the Company in respect of any shares purchasable upon the exercise of the warrant or any portion thereof unless and until a certificate

or certificates representing such shares have been issued or a book entry representing such shares has been made and such shares have

been deposited with the appropriate registered book-entry custodian.

The Company recognizes compensation cost related to employee warrants

on a straight-line basis over the requisite service period, which is the period in which the related services are received.

As of September

30, 2024, none of the employee warrants have been exercised and 3,054,358 employee warrants remain outstanding.

Preferred Stock

In March 2024, Pre-Merger Oruka issued and

sold an aggregate of 20,000,000 shares of Pre-Merger Oruka Series A Preferred Stock to Fairmount (see Note 13), at a purchase price

of approximately $ 0.15 per share, for aggregate gross proceeds of $ 3.0 million.

Pre-Merger Oruka incurred less than $ 0.1 million

of issuance costs in connection with this transaction.

Upon the issuance of the Pre-Merger Oruka Series A Preferred Stock, the Company

assessed the embedded conversion and liquidation features of the securities as described below and determined that such features did not

require the Company to separately account for these features.

In August 2024, upon the closing of the Merger, the Company converted

the Pre-Merger Oruka Series A Preferred Stock to 137,138 shares of Company Series B Preferred Stock.

In September 2024, in connection with the PIPE

Financing, the Company issued and sold an aggregate of 2,439 shares of the Company Series A Preferred Stock at a purchase price of $ 23,000.00

of September 30, 2024, convertible preferred stock consisted of the following (in thousands, except share data):

September 30, 2024

Preferred Stock

Issuable Upon

Series A Non-Voting Preferred Stock

Series B Non-Voting Preferred Stock

Pursuant to the Certificate of Designation of Preferences,

Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock (the “Series A Certificate of Designation”)

filed in connection with the PIPE Financing, holders of Company Series A Preferred Stock are entitled to receive dividends on shares of

Company Series A Preferred Stock equal to, on an as-if-converted-to-Company Common Stock basis, and in the same form as, dividends actually

paid on shares of Company Common Stock.

Except as provided in the Series A Certificate of Designation or as otherwise required by law,

the Company Series A Preferred Stock does not have voting rights.

The Company Series A Preferred Stock shall rank on parity with the Company

Common Stock and Company Series B Preferred Stock upon any liquidation, dissolution or winding-up of the Company.

Subject to the terms

and limitations contained in the Series A Certificate of Designation, the Company Series A Preferred Stock issued in the PIPE Financing

will not become convertible until the Company’s stockholders approve the conversion of the Company Series A Preferred Stock into

shares of Company Common Stock in accordance with the listing rules of the Nasdaq Stock Market (the “Stockholder Approval”), which resulted in the Company Series A Preferred Stock being classified

outside of stockholders’ equity (deficit) on the Company’s condensed consolidated balance sheet.

Following the Stockholder Approval, each share of Company Series A Preferred Stock will automatically convert into 1,000 shares of Company

Common Stock, subject to certain limitations, including that shares of Company Series A Preferred Stock shall not be convertible if the

conversion would result in a holder, together with its affiliates, beneficially owning more than 9.99 % of the Company’s outstanding

shares of Company Common Stock as of the applicable conversion date, which may be increased at the holders’ option (not to exceed

19.99 %), effective in accordance with the terms of the Series A Certificate of Designation.

If, at any time after the earlier of Stockholder

Approval or six months after the initial issuance of the Series A non-voting preferred stock, the Company fails to deliver to a holder

such certificate or certificates, the Company shall, at the request of the holder, pay an amount equal to the closing price of Company’s

common stock on the trading day immediately prior to the date on which notice to conversion is received by the Company (the “Fair

Value”) of such undelivered shares, with such payment to be made within two business days from the date of request by the holder,

whereupon the Company’s obligations to deliver such shares underlying the notice of conversion shall be extinguished upon payment

in full of the Fair Value of such undelivered shares;

provided, however that such request shall be presumed to have been made by such

holder if Stockholder Approval shall not have been obtained prior to the date on which the notice of conversion is delivered to the Company.

Pursuant to the Certificate of Designation of Preferences, Rights and

Limitations of the Series B Non-Voting Convertible Preferred Stock (the “Series B Certificate of Designation”) filed in connection

with the Merger, holders of Company Series B Preferred Stock are entitled to receive dividends on shares of Company Series B Preferred

Stock equal to, on an as-if-converted-to-Company Common Stock basis, and in the same form as, dividends actually paid on shares of Company

Common Stock.

Except as provided in the Series B Certificate of Designation or as otherwise required by law, the Company Series B Preferred

Stock does not have voting rights.

The Company Series B Preferred Stock shall rank on parity with the Company Common Stock as to the distribution

of assets upon any liquidation, dissolution, or winding-up of the Company.

Each share of Company Series B Preferred Stock is convertible

at the option of the holder, at any time, and without the payment of additional consideration by the holder.

As of September 30, 2024,

each outstanding share of Company Series B Preferred Stock was convertible into common stock at a ratio of approximately 83.3332:1.

As of September 30, 2024, the Certificate of Incorporation

provides for 545,000,000 authorized shares of Company Common Stock.

As of September 30, 2024, 34,988,550 shares of Company Common Stock

were issued and outstanding, including 2,207,553 shares of RSAs issued and outstanding.

of September 30, 2024, the Company had common stock reserved for future issuance as follows:

September 30,

Shares issuable on conversion of Company Series A Preferred Stock

These warrants vest over a period of four years .

The Company recognizes compensation

cost related to warrants on a straight-line basis over the requisite service period, which is the period in which the related services

are received.

3,054,358 warrants are outstanding as of March 31, 2025 and December 31, 2024.

Convertible Preferred Stock

In March 2024, Pre-Merger

Oruka issued and sold an aggregate of 20,000,000 shares of Pre-Merger Oruka Series A Preferred Stock to Fairmount (see Note 13),

at a purchase price of approximately $ 0.15 per share, for aggregate gross proceeds of $ 3.0 million.

Pre-Merger Oruka incurred less

than $ 0.1 million of issuance costs in connection with this transaction.

Upon the issuance of the Pre-Merger Oruka Series A

Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities as described below and determined

that such features did not require the Company to separately account for these features.

In August 2024, upon Closing,

the Pre-Merger Oruka Series A Preferred Stock converted to 137,138 shares of Company Series B Preferred Stock.

In September 2024, in connection

with the PIPE Financing, the Company issued and sold an aggregate of 2,439 shares of the Company Series A Preferred Stock at a purchase

price of $ 23,000.00 per share.

In November 2024, the 2,439 shares of the Company Series A Preferred Stock were converted to 2,439,000

shares of Company Common Stock.

As of December 31, 2024 and March 31, 2025, there are no outstanding shares of Company Series A Preferred

As of March 31, 2025, Company Series B Preferred

Stock consisted of the following (in thousands, except share data):

March 31, 2025

Stock Issuable

Company Series B Preferred Stock

Pursuant to the Certificate

of Designation of Preferences, Rights and Limitations of the Series B Non-Voting Convertible Preferred Stock (the “Series B Certificate

of Designation”) filed in connection with the Merger, holders of Company Series B Preferred Stock are entitled to receive dividends

on shares of Company Series B Preferred Stock equal to, on an as-if-converted-to-Company Common Stock basis, and in the same form as,

dividends actually paid on shares of Company Common Stock.

Except as provided in the Series B Certificate of Designation or as otherwise

required by law, the Company Series B Preferred Stock does not have voting rights.

The Company Series B Preferred Stock shall rank on

parity with the Company Common Stock as to the distribution of assets upon any liquidation, dissolution, or winding-up of the Company.

Each share of Company Series B Preferred Stock is convertible at the option of the holder, at any time, and without the payment of additional

consideration by the holder.

As of March 31, 2025, each outstanding share of Company Series B Preferred Stock was convertible into common

stock at a ratio of approximately 83.3332:1 .

Paruka Warrant

On December 31, 2024, the

Company settled its 2024 obligations under the Paruka Warrant Obligation (defined below) by issuing Paruka Holding LLC (“Paruka”)

a warrant to purchase 596,930 shares of Company Common Stock at an exercise price of $ 19.39 per share.

The warrant has a term of 10 years,

is fully vested, and is exercisable in part or full at any time during the term of the warrant.

As of March 31, 2025, the warrant issued

under the Paruka Warrant Obligation is outstanding and unexercised.

See Note 8 for additional information on the Paruka Warrant Obligation.

As of March 31, 2025, the

Certificate of Incorporation provides for 545,000,000 authorized shares of Company Common Stock.

As of March 31, 2025, 37,440,510 shares

of Company Common Stock were issued and outstanding, including 2,207,553 shares of restricted common stock awards (“RSAs”)

issued and outstanding.

As of March 31, 2025 and December 31, 2024, the

Company had common stock reserved for future issuance as follows:

Shares issuable on conversion of Company Series B Preferred Stock

Shares issuable upon exercise of pre-funded warrants

Shares issuable upon exercise of warrant under the Paruka Warrant Obligation

Outstanding and issued stock options

3 unchanged sentences

Total shares of common stock reserved

Stock-Based Compensation

2024 Equity Incentive Plan

The 2024 Equity Incentive Plan (“2024 Plan”)

was adopted by the board of directors of Pre-Merger Oruka on February 6, 2024.

The 2024 Plan provided for Pre-Merger Oruka to grant

stock options, restricted stock awards, restricted stock units, and other stock-based awards to employees, officers, directors, consultants,

and advisors.

Equity Incentive Stock options granted under the 2024 Plan generally vest over four years, subject to the participant’s

continued service, and expire after ten years, although stock options have been granted with vesting terms less than four years.

As of September 30, 2024, there are no shares of common stock available for issuance.

The 2024 Equity Incentive

Plan (“2024 Plan”) was adopted by the board of directors of Pre-Merger Oruka on February 6, 2024.

The 2024 Plan provided

for Pre-Merger Oruka to grant stock options, restricted stock awards, restricted stock units, and other stock-based awards to employees,

officers, directors, consultants, and advisors.

Equity incentive stock options granted under the 2024 Plan generally vest over four years,

subject to the participant’s continued service, and expire after ten years, although two non-employee stock options were granted

with vesting terms less than four years.

As of March 31, 2025, 1,179,193 shares were subject to options outstanding under the 2024

Plan and will become available under the 2024 Stock Incentive Plan (defined below) to the extent the options are forfeited or lapse unexercised.

2024 Stock Incentive Plan

On August 22, 2024, the 2024 Stock Incentive Plan

(“2024 Stock Plan”) was approved by the Company’s stockholders and on August 29, 2024, the board of directors of the

Company (the “Board”) ratified the 2024 Stock Plan.

The 2024 Stock Plan allows for the grant of stock options, stock appreciation

rights, restricted stock awards, restricted stock units, other stockholder-based awards and incentive bonuses.

The 2024 Stock Plan is

administered by the Compensation Committee of the Board (the “Compensation Committee”) or another committee designated by

the Board to administer the Plan.

The initial share pool under the 2024 Stock Plan is 4,634,891 shares of Company Common Stock and as

of September 30, 2024, there are 4,526,324 shares available in the pool.

The shares that may be issued under the 2024 Stock Plan will

be automatically increased on January 1 of each year beginning in 2025 and ending with a final increase on January 1, 2034 in an amount

equal to 5 % of the diluted stock (including Company Common Stock, preferred stock and unexercised pre-funded warrants) on the preceding

December 31, unless a lower, or no, increase is determined by the Compensation Committee.

Current or prospective employees, officers,

non-employee directors, and other independent service providers of the Company and its subsidiaries are eligible to participate in the

2024 Stock Plan.

On August 22, 2024, the 2024

Stock Incentive Plan (“2024 Stock Plan”) was approved by the Company’s stockholders and on August 29, 2024, the board

of directors of the Company (the “Board”) ratified the 2024 Stock Plan.

The 2024 Stock Plan allows for the grant of stock

options, stock appreciation rights, restricted stock awards, restricted stock units, other stockholder-based awards and incentive bonuses.

An additional 2,753,543 shares became available for issuance under the 2024 Stock Plan on January 1, 2025 as a result of the annual increase

pursuant to the evergreen provision.

As of March 31, 2025, 7,388,434

shares were reserved for issuance under the 2024 Stock Plan, of which 5,302,167 shares were available for future grant and 2,086,267 shares

were subject to outstanding options.

2024 Employee Stock Purchase Plan

The 2024 Employee Stock Purchase Plan (the “ESPP”)

was approved by the board of directors of ARCA on July 20, 2024, and by ARCA’s stockholders on August 22, 2024.

The ESPP became

effective on August 29, 2024, at which time 463,489 shares were reserved for issuance.

The shares that may be issued under the ESPP will

be automatically increased on January 1 of each year beginning in 2025 and ending with a final increase on January 1, 2034 in an amount

equal to 1 % of the diluted stock (including Company Common Stock, preferred stock and unexercised pre-funded warrants) on the preceding

December 31, unless a lower, or no, increase is determined by the Compensation Committee.

As of September 30, 2024, no shares have been

issued out of the ESPP.

Option Valuation

The following table summarizes the weighted-average

assumptions used in calculating the fair value of the awards for the three months ended September 30, 2024 and for the period from February 6,

2024 (inception) to September 30, 2024:

September 30,

The 2024 Employee Stock Purchase

Plan (the “ESPP”) became effective in August 2024.

Eligible employees may purchase shares of Company Common Stock under the

ESPP at 85 % of the lower of the fair market value of the Company Common Stock as of the first or the last day of each offering period.

Employees are limited to contributing 15 % of the employee’s eligible compensation and may not purchase more than $ 25,000 of

stock during any calendar year.

The ESPP will terminate ten years from the first purchase date under the plan, unless terminated

earlier by the board of directors.

An additional 550,709 shares became available for issuance under the ESPP on January 1, 2025 as a result

of the annual increase pursuant to the evergreen provision.

The Company issued no shares

during the three months ended March 31, 2025 out of the ESPP and as of March 31, 2025, there were 1,011,238 shares of Company Common Stock

available in the pool for future issuances.

For the three months ended

March 31, 2025, stock-based compensation expense related to the ESPP was less than $ 0.1 million.

Stock Option Valuation

The following table summarizes

the weighted-average assumptions used in calculating the fair value of the awards for the three months ended March 31, 2025 and for the

period from February 6, 2024 (inception) to March 31, 2024:

2025 Period from

September 30,

(Inception) to

Expected term (in years) 6.0 6.0

2 unchanged sentences

Expected dividend yield —

The following table summarizes the stock option activities under the

2024 Plan and 2024 Stock Plan for the period of February 6, 2024 (inception) through September 30, 2024:

Stock Options Weighted

Share Weighted

Term (in Years) Aggregate

Value (in Thousands)

Balance as of February 6, 2024 (inception) —

Stock Options

The following table summarizes

the stock option activities under the 2024 Plan and the 2024 Stock Plan for the three months ended March 31, 2025:

Stock Options

Outstanding Weighted

Exercise Price

Per Share Weighted

(in Years) Aggregate

(in Thousands)

Balance as of December 31, 2024 1,567,760 $ 11.39 9.4 $ 15,470

Granted 1,697,700 $ 12.48

Balance as of September 30, 2024 1,287,760 $ 7.97 9.6 $ 21,507

Vested and expected to vest, September 30, 2024 1,287,760 $ 7.97 9.6 $ 21,507

Exercisable, September 30, 2024 —

The weighted average grant-date fair value per share of stock options

granted during the period from February 6, 2024 (inception) to September 30, 2024 was $ 6.44 per share.

Canceled/forfeited —

Balance as of March 31, 2025 3,265,460 $ 11.96 9.5 $ 4,704

Vested and expected to vest, March 31, 2025 3,265,460 $ 11.96 9.5 $ 4,704

Exercisable, March 31, 2025 161,539 $ 7.77 9.3 $ 521

The weighted average grant-date

fair value per share of stock options granted during the three months ended March 31, 2025 was $ 9.88 per share.

Aggregate intrinsic value

1 unchanged sentence

in-the-money employee stock options.

In February 2024 and March 2024, the Company

issued 2,207,553 shares of RSAs to certain employees, directors, and consultants at a price of $ 0.0001 per share, the then par value of

Pre-Merger Oruka Common Stock.

Such RSAs have service-based vesting conditions only and vest over a four-year period, during which time

all unvested shares are subject to forfeiture in the event the holder’s service with the Company voluntarily or involuntarily terminates.

following table summarizes the RSAs activity for the period from February 6, 2024 (inception) through September 30, 2024:

Unvested balance

as of February 6, 2024 (inception)

balance as of September 30, 2024

Agreements and Paruka Warrant Obligation

In March 2024, the Company entered into antibody

discovery and option agreements with Paragon and Paruka (the “Option Agreements”).

Under the terms of Option Agreements, Paragon

identifies, evaluates, and develops antibodies directed against certain mutually agreed therapeutic targets of interest to the Company,

and the Company has the exclusive option to, on a research program-by-research program basis, be granted an exclusive, worldwide license

to all of Paragon’s right, title, and interest in and to the intellectual property resulting from the applicable research program

to develop, manufacture and commercialize the antibodies and products directed to the selected target(s).

Paruka will be entitled to grants

of warrants to purchase a number of shares equal to 1.00 % of then outstanding shares of the Company’s stock, on a fully diluted

basis, on December 31, 2024 and December 31, 2025, at the fair market value determined by the Board (the “Paruka Warrant

Obligation”).

The grant dates for the issuance of warrants are expected to be December 31, 2024 and December 31, 2025

as all terms of the award, including number of shares and exercise price, will be known by all parties.

The service inception period for

the grant precedes the grant date, with the full award being vested as of the grant date with no post-grant date service requirement.

Accordingly, the warrants expected to be granted to Paruka were accounted for as a liability on the condensed balance sheet and, after

the initial recognition, the liability is adjusted to fair value at the end of each reporting period, with changes in fair value recorded

in the statement of operations and comprehensive loss as stock-based compensation expenses under research and development expenses.

of September 30, 2024, the estimated fair value of warrants to be granted on December 31, 2024 was $ 11.0 million.

For the three months

ended September 30, 2024 and the period from February 6, 2024 (inception) to September 30, 2024, $ 7.3 million and $ 7.7 million were

recognized as stock-based compensation expenses related to the Paruka Warrant Obligation, respectively.

As stated above, on July 3, 2024, the Subscription

Agreement was amended and restated, among other things, for employee warrants to be issued to certain Pre-Merger Oruka’s employees,

directors, and service providers, immediately prior to the closing of the Merger.

Pursuant to this amendment, during the three months

ended September 30, 2024, the Company issued 3,054,358 employee warrants at an exercise price of $ 7.80 per warrant, which are accounted

as equity in the condensed consolidated financial statements

following table summarizes the employee warrant activity for the period from February 6, 2024 (inception) through September 30, 2024:

Warrants Weighted

Price Per Share Weighted

Term (in Years) Aggregate

Value (in Thousands)

Balance as of February 6, 2024 (inception) —

Granted 3,054,358 $ 7.80

Balance as of September 30, 2024 3,054,358 $ 7.80 9.8 $ 51,038

Vested and expected to vest, September 30, 2024 3,054,358 $ 7.80 9.8 $ 51,038

Vested and exercisable, September 30, 2024 —

The weighted average grant-date fair value per share of employee warrants

granted during the period from February 6, 2024 (inception) to September 30, 2024 was $ 6.27 per share.

Aggregate intrinsic value

represents the difference between the estimated fair value of the underlying Company Common Stock and the exercise price of outstanding,

in-the-money employee warrants.

The following table summarizes the weighted-average

assumptions used in calculating the fair value of the employee warrants for the three months ended September 30, 2024 and for the period

from February 6, 2024 (inception) to September 30, 2024:

Three Months Ended

September 30,

2024 Period from

September 30,

Expected term (in years) 6.1 6.1

Expected volatility 99.0 % 99.0 %

Risk-free interest rate 4.2 % 4.2 %

Expected dividend yield —

Compensation Expense

following table summarizes the classification of the Company’s stock-based compensation expense in the condensed consolidated statement

of operations and comprehensive loss (in thousands):

Three Months Ended

September 30,

Restricted Stock Awards

In February 2024 and March 2024,

the Company issued 2,207,553 shares of RSAs to certain employees, directors, and consultants at a price of $ 0.0001 per share, the then

par value of Pre-Merger Oruka Common Stock.

Such RSAs have service-based vesting conditions only and vest over a four-year period, during

which time all unvested shares are subject to forfeiture in the event the holder’s service with the Company voluntarily or involuntarily

576,571 RSAs vested during the three months ended March 31, 2025 and as of March 31, 2025, 1,630,982 of the RSAs remain unvested.

For each of the three months ended March 31, 2025 and from February 6, 2024 (inception) to March 31, 2024, stock-based compensation expense

related to RSAs was less than $ 0.1 million.

The following table summarizes

the RSA activity for the three months ended March 31, 2025:

Number of RSAs

Weighted Average

Grant Date Fair

Unvested balance as of December 31, 2024

Unvested balance as of March 31, 2025

Option Agreements and Paruka Warrant Obligation

As part of the Option Agreements, (defined in Note 10 below) on December 31,

2024 the Company granted, and on December 31, 2025, will grant, Paruka a warrant to purchase a number of shares equal to 1.00 % of

outstanding shares as of the date of the grant on a fully-diluted basis, with an exercise price equal to the fair market value of the

underlying shares on the grant date (the “Paruka Warrant Obligation”).

The grant dates for the issuance

of warrants were expected to be December 31, 2024 and December 31, 2025 as all terms of the award, including number of shares

and exercise price, will be known by all parties.

The Company determined that the 2024 and 2025 grants are two separate grants, as there

would be no obligation for the 2025 grant had the Company exercised or terminated all of the options under the Option Agreements prior

to December 31, 2024.

The service inception period for the grant precedes the grant date, with the full award being vested as of the grant

date with no post-grant date service requirement.

Accordingly, the warrant expected to be granted to Paruka was accounted for as a liability

on the balance sheet on the service inception date and, after the initial recognition, the liability is adjusted to fair value at the

end of each reporting period, with changes in fair value recorded in the condensed consolidated statement of operations and comprehensive

loss as stock-based compensation expenses under research and development expenses.

For the period from February 6, 2024 (inception) to

March 31, 2024, less than $ 0.1 million was recognized as stock-based compensation expenses related to the December 31, 2024 Paruka Warrant

On issuance of the warrant to Paruka on December 31, 2024, the fair value of the warrant issued on December 31, 2024 of $ 10.4

million was reclassified from liability to equity on the condensed consolidated balance sheet as of December 31, 2024.

As of March 31, 2025, the

estimated fair value of the warrant to be granted on December 31, 2025 was $ 5.6 million.

For the three months ended March 31, 2025 $ 1.4

million was recognized as stock-based compensation expenses related to the December 31, 2025 Paruka Warrant Obligation.

As of March 31,

2025, there was $ 4.2 million in unamortized expense related to the December 31, 2025 Paruka Warrant Obligation.

Employee Warrants

As stated above, in July

2024, the Subscription Agreement was amended and restated, among other things, for employee warrants to be issued to certain Pre-Merger

Oruka employees and directors prior to the Closing.

During the period from February 6, 2024 (inception) to December 31, 2024, the Company

issued 3,054,358 warrants at an exercise price of $ 7.80 per warrant, which are accounted as equity in the condensed consolidated financial

The employee warrants were subject to performance and service based vesting requirements and upon completion of the Merger

the performance-based requirements had been achieved.

During the three months ended March 31, 2025, no employee warrants were granted.

The following table summarizes

the employee warrant activity during the three months ended March 31, 2025:

Outstanding Weighted

Exercise Price

Per Share Weighted

(in Years) Aggregate

(in Thousands)

Balance as of December 31, 2024 3,054,358 $ 7.80 9.5 $ 35,400

Canceled/forfeited —

Balance as of March 31, 2025 3,054,358 $ 7.80 9.3 $ 7,514

Vested and expected to vest, March 31, 2025 3,054,358 $ 7.80 9.3 $ 7,514

Exercisable, March 31, 2025 —

Stock-Based Compensation Expense

The following table summarizes

the classification of the Company’s stock-based compensation expense in the condensed consolidated statements of operations and

comprehensive loss (in thousands):

(Inception) to

Research and development

General and administrative

As of September 30, 2024, total unrecognized compensation cost related

to the unvested stock options was $ 7.5 million, which is expected to be recognized over a weighted average period of approximately 3.4

As of September 30, 2024, total unrecognized compensation cost related to the unvested RSAs was less than $ 0.1 million, which is

expected to be recognized over a weighted average period of 3.4 years.

As of September 30, 2024, the unrecognized compensation cost related

to the employee warrants was $ 17.8 million, which is expected to be recognized over a weighted average period of 3.6 years.

following table summarizes the award types of the Company’s stock-based compensation expense in the condensed consolidated statement

of operations and comprehensive loss (in thousands):

Three Months Ended

September 30,

As of March 31, 2025, total

unrecognized compensation cost related to the unvested stock options was $ 27.6 million, which is expected to be recognized over a weighted

average period of approximately 3.4 years.

As of March 31, 2025, total

unrecognized compensation cost related to the unvested RSAs was less than $ 0.1 million, which is expected to be recognized over a weighted

average period of 2.9 years.

As of March 31, 2025, the

unrecognized compensation cost related to the employee warrants was $ 14.7 million, which is expected to be recognized over a weighted

average period of 3.1 years.

The following table summarizes

the award types of the Company’s stock-based compensation expense in the condensed consolidated statements of operations and comprehensive

loss (in thousands):

(Inception) to

Paruka Warrant Obligation

2 unchanged sentences

Employee stock purchase plan

provision for income taxes was recorded for the three months ended September 30, 2024 and for the period of February 6, 2024 (inception)

through September 30, 2024.

Deferred tax assets generated from the Company’s net operating losses have been fully reserved, as

the Company believes it is not more likely than not that the benefit will be realized due to the Company’s cumulative losses generated

Option Agreements

In March 2024, the Company entered into Option

Agreements with Paragon and Paruka.

Under the terms of the Option Agreements, Paragon identifies, evaluates and develops antibodies directed

against certain mutually agreed therapeutic targets of interest to the Company.

The Option Agreements include two selected targets, IL-23

(“ORKA-001”) and IL-17 A/F (“ORKA-002”).

Under the Option Agreements, the Company has the exclusive options to,

on a research program-by-research program basis, be granted an exclusive, worldwide license to all of Paragon’s right, title and

interest in and to the intellectual property resulting from the applicable research program to develop, manufacture and commercialize

the antibodies and products directed to the selected targets (each, an “Option”), with the exception of pursuing ORKA-001

for the treatment of inflammatory bowel disease.

If the Company exercises its options, it will be required to make non-refundable milestone

payments to Paragon of up to $ 12.0 million under each respective agreement upon the achievement of certain clinical development milestones,

up to $ 10.0 million under each respective agreement upon the achievement of certain regulatory milestones as well as tiered royalty

payments in the low-to-mid single-digits beginning on the first commercial sale.

From time to time, the Company can choose to add additional

targets to the collaboration by mutual agreement with Paragon.

Company’s exclusive Option with respect to each research program for a particular target initiated by the parties (“Research

Program”) is exercisable at its sole discretion at any time during the period beginning on the initiation of activities under the

associated Research Program and ending a specified number of days following (i) with respect to any Research Program other than

ORKA-001, the delivery of the data package from Paragon related to the results of the Research Plan activities, or (ii) with respect

to ORKA-001, the completion of the IL-23 antibody selection process described in the agreement (the “Option Period”).

is no payment due upon exercise of an Option pursuant to the Option Agreements.

Unless terminated earlier, the Option Agreements

shall continue in force on a Research Program-by-Research Program basis until the earlier of:

(i) the end of the Option Period for

such Research Program, as applicable, if such Option is not exercised by the Company;

(ii) the expiration of the 30-day period after

the Company exercises its Option with respect to such Research Program, subject to mutually agreed extension, during the Option Period

and the parties are unable to finalize and execute a license agreement, and (iii) the expiration of the applicable research term (the

Upon the expiration of the Term for all then-existing Research Programs, under the Option Agreements, the Option

Agreements will automatically expire in its entirety.

The Company may terminate the Option Agreements or any Research Program at any

time for any or no reason upon 30 days’ prior written notice to Paragon, provided that the Company must pay certain unpaid

fees due to Paragon upon such termination, as well as any non-cancellable obligations reasonably incurred by Paragon in connection with

its activities under any terminated Research Program.

Paragon may terminate the Option Agreements or a Research Program immediately upon

written notice to the Company if, as a result of any action or failure to act by the Company or its affiliates, such Research Program

or all material activities under the applicable Research Plan are suspended, discontinued or otherwise delayed for a certain consecutive

number of months.

Each party has the right to terminate the Option Agreements or any Research Program upon (i) 30 days’

prior written notice of the other party’s material breach that remains uncured for the 30-day period and (ii) the other party’s

Pursuant to the Option Agreements, on a research

program-by-research program basis following the finalization of the research plan for each respective research program, the Company was

required to pay Paragon a one-time, nonrefundable research initiation fee of $ 0.8 million related to the ORKA-001 program.

was recognized as a research and development expense during the period from February 6, 2024 (inception) to September 30, 2024.

June 2024, pursuant to the Option Agreements with Paragon, the Company completed the selection process of its development candidate for

IL-23 antibody for ORKA-001 program.

The Company was responsible for 50 % of the development costs incurred through the completion of the

IL-23 selection process.

The Company received the rights to at least one selected IL-23 antibody in June 2024.

During the three months

ended September 30, 2024, the Company exercised its option for ORKA-001 and recorded a $ 1.5 million milestone payment related to the achievement

of development candidate as research and development expense in the Company’s condensed consolidated statements of operations and

comprehensive loss for each of the three months ended September 30, 2024 and for the period from February 6, 2024 (inception) to September

The Company’s share of development costs incurred during the three months ended September 30, 3024 and for the period

from February 6, 2024 (inception) to September 30, 2024 was $ 0.8 million and $ 13.2 million, respectively, which were recorded as research

and development expenses during the respective periods.

An amount of $ 2.3 million is included in related party accounts payable and other

current liabilities as of September 30, 2024.

The Company was also required to reimburse Paragon

$ 3.3 million for development costs related to ORKA-002 incurred by Paragon through December 31, 2023 and certain other development

costs incurred by Paragon between January 1, 2024 and March 6, 2024 as stipulated by the Option Agreements.

This amount was

recognized as a research and development expense during the period from February 6, 2024 (inception) to September 30, 2024.

is also responsible for the development costs incurred by Paragon from January 1, 2024 through the completion of the IL-17 selection

The Company recognized an amount of $ 0.8 million payable to Paragon for the research initiation fee related to ORKA-002

following the finalization of the ORKA-002 research plan.

This was recognized as research and development expenses in the period from

February 6, 2024 (inception) to September 30, 2024.

The Company accounted for development costs of $ 3.8 million and $ 6.6 million during

the three months ended September 30, 3024 and for the period from February 6, 2024 (inception) to September 30, 2024, respectively, as

research and development expenses during the respective periods.

An amount of $ 3.8 million is included in related party accounts payable

and other current liabilities as of September 30, 2024.

As part of the Option Agreements, on each of December

31, 2024 and December 31, 2025, the Company will grant warrants to purchase a number of shares equal to 1.00 % of outstanding shares as

of the date of the grant on a fully diluted basis with an exercise price equal to the fair market value of the underlying shares on the

The warrants are liability-classified and after the initial recognition, the liability is adjusted to fair value at the end

of each reporting period, with changes in fair value recorded in the consolidated statement of operations and comprehensive loss (see

Note 8) as stock-based compensation expenses under research and development expenses.

Company expenses the service fees as the associated costs are incurred when the underlying services are rendered.

Such amounts are classified

within research and development expenses in the accompanying condensed consolidated statement of operations and comprehensive loss.

The Company concluded that the rights obtained

under the Option Agreements represent an asset acquisition whereby the underlying assets comprise in-process research and development

assets with no alternative future use.

The Option Agreements did not qualify as a business combination because substantially all of the

fair value of the assets acquired was concentrated in the exclusive license options, which represent a group of similar identifiable assets.

The research initiation fee represents a one-time cost on a research program-by-research program basis for accessing research services

or resources with benefits that are expected to be consumed in the near term, therefore the amounts paid are expensed as part of research

and development costs immediately.

Amounts paid as reimbursements of ongoing development cost, monthly development cost fee and additional

development expenses incurred by Paragon due to work completed for selected targets prior to the effective date of the Option Agreements

that is associated with services being rendered under the related Research Programs are recognized as research and development expense

when incurred.

For the three months ended September 30, 2024 and the period from February 6,

2024 (inception) to September 30, 2024, the Company recognized $ 13.4 million and $ 33.8 million of expenses, respectively, in connection

with services provided by Paragon and Paruka under the Option Agreements.

The Company operates and

manages its business activities on a consolidated basis and operates in one reportable segment.

The Company operates as a

single reportable and operating segment.

Its Chief Executive Officer, serving as the Chief Operating Decision Maker (“CODM”),

oversees operations on an aggregated basis to allocate resources effectively.

In assessing the Company’s financial performance,

the CODM regularly reviews total operating expenses and consolidated net loss.

The measure of segment assets

is reported on the balance sheet as total consolidated assets.

The Company’s long-lived assets consist primarily of property and

equipment, net.

As of March 31, 2025 and December 31, 2024 all of long-lived assets were in the U.S.

The table below is a summary

of the segment loss from operations, including significant segment expenses (in thousands):

(Inception) to

Research and development personnel-related (excluding stock-based compensation)

General and administrative personnel-related (excluding stock-based compensation)

Research and development stock-based compensation

General and administrative stock-based compensation

External research and development

Other research and development

General and administrative, excluding personnel-related and stock-based compensation

Total operating expenses

Loss from operations

Option Agreements and License Agreements

Option Agreements – Paragon Therapeutics

In March 2024, the Company

entered into two antibody discovery and option agreements (“Option Agreements”) with Paragon Therapeutics, Inc.

Under the terms of each agreement, Paragon identifies, evaluates, and develops antibodies directed against certain mutually

agreed therapeutic targets of interest to the Company.

From time to time, the Company can choose to add additional targets to the collaboration

upon agreement with Paragon and Paruka.

Under the Option Agreements, the Company has the exclusive option to, on a research program-by-research

program basis, be granted an exclusive, worldwide license to all of Paragon’s right, title, and interest in and to the intellectual

property resulting from the applicable research program to develop, manufacture, and commercialize the antibodies and products directed

to the selected target(s).

The Company has initiated certain research programs with Paragon that generally focus on discovering,

generating, identifying and/or characterizing antibodies directed to a particular target (each, a “Research Program”), including

for IL-23 and IL-17A/F for ORKA-001 and ORKA-002, respectively.

The exclusive option with respect to each Research Program is exercisable

at the Company’s sole discretion at such time as specified in the Option Agreements (the “Option Period”).

no payment due upon exercise of an Option pursuant to the Option Agreements.

For each of these agreements, once the Company enters into

the corresponding license agreements, it will be required to make non-refundable milestone payments to Paragon of up to $ 12.0 million

under each respective agreement upon the achievement of certain clinical development milestones, up to $ 10.0 million under each respective

agreement upon the achievement of certain regulatory milestones, as well as a low single-digit percentage royalty for antibody products

beginning on the first commercial sale in each program.

The Company may terminate

any Option Agreement or any Research Program at any time for any or no reason upon 30 days’ prior written notice to Paragon,

provided that it must pay certain unpaid fees due to Paragon upon such termination, as well as any non-cancellable obligations reasonably

incurred by Paragon in connection with its activities under any terminated Research Program.

Paragon may terminate any Option Agreement

or a Research Program immediately upon written notice to the Company if, as a result of any action or failure to act by the Company or

its affiliates, such Research Program or all material activities under the applicable Research Plan are suspended, discontinued or otherwise

delayed for a certain consecutive number of months.

Each party has the right to terminate the Option Agreements or any Research Program

upon material breach that remains uncured or the other party’s bankruptcy.

License Agreements – Paragon Therapeutics

In September 2024, the Company

exercised its exclusive option to acquire certain rights to ORKA-001, and in December 2024, it entered into a corresponding license agreement

with Paragon (the “ORKA-001 License Agreement”), pursuant to which Paragon granted the Company a royalty-bearing, world-wide,

exclusive license to develop, manufacture, commercialize or otherwise exploit certain antibodies and products targeting IL-23 in all fields

other than the field of inflammatory bowel disease (“ORKA-001 Field”).

In December 2024, the Company exercised its exclusive

option to acquire certain rights to ORKA-002, and in February 2025, it entered into the corresponding license agreement with Paragon (the

“ORKA-002 License Agreement” and together with the ORKA-001 License Agreement, the “License Agreements”), pursuant

to which Paragon granted the Company a royalty-bearing, world-wide, exclusive license to develop, manufacture, commercialize or otherwise

exploit certain antibodies and products targeting IL-17A/F in all fields (“ORKA-002 Field” and together with the ORKA-001

Field, the “Fields”).

Pursuant to each of the two License Agreements, Paragon has agreed not to conduct any new campaigns

that generate anti-IL-23 monospecific antibodies or anti-IL-17A/F monospecific antibodies in the respective agreed-upon fields.

The License Agreements provide

the Company with exclusive licenses in the Fields to Paragon’s patent applications covering the related antibodies, their method

of use and their method of manufacture and Paragon has agreed not to conduct any new campaigns that generate anti-IL-23 monospecific antibodies

or anti-IL-17A/F monospecific antibodies for the ORKA-001 Field or the ORKA-002 Field, respectively, for at least five years.

the License Agreements may be terminated on 60 days’ notice to Paragon, on material breach without cure, and on a party’s

insolvency or bankruptcy to the extent permitted by law.

Pursuant to the terms of each of the License Agreements,

the Company is obligated to pay Paragon non-refundable milestone payments of up to $ 12.0 million under each respective agreement upon

the achievement of certain clinical development milestones and up to $ 10.0 million under each respective agreement upon the achievement

of certain regulatory milestones.

In addition, the Company is obligated to pay Paragon a low single-digit percentage royalty for antibody products

for each of ORKA-001 and ORKA-002.

For each of the License Agreements, the royalty term ends on the later of (i) the last-to-expire licensed

patent or our patent directed to the manufacture, use or sale of a licensed antibody in the country at issue or (ii) 12 years from the

date of first sale of a Company product.

There is also a royalty step-down if there is no Paragon patent in effect during the royalty

term for each program.

Each of the License Agreements may be terminated on 60 days’ notice to Paragon, on material breach without

cure, and on a party’s insolvency or bankruptcy to the extent permitted by law.

As of March 31, 2025, the Company has incurred and

expensed milestone payments of $ 4.0 million and $ 1.5 million for ORKA-001 License Agreement and ORKA-002 License Agreement, respectively.

Additionally, as part of

the Option Agreements, on December 31, 2024 the Company granted and on December 31, 2025, will grant Paruka a warrant to purchase

a number of shares equal to 1.00 % of outstanding shares as of the date of the grant on a fully-diluted basis, with an exercise price equal

to the fair market value of the underlying shares on the grant date.

Pursuant to the Option Agreements,

on a research program-by-research program basis following the finalization of the research plan for each respective research program,

the Company is required to pay certain initiation fees, development costs and milestone payments to Paragon.

For the ORKA-001 program,

the Company recognized research and development expenses related to the following milestones during the period from February 6, 2024 (inception)

to December 31, 2024:

a one-time, nonrefundable research initiation fee of $ 0.8 million;

$ 1.5 million related to exercising its option

and achievement of development candidate;

and $ 2.5 million related to completing the first dosing of a human subject in a Phase 1 trial.

The Company was responsible for 50 % of the development costs incurred through the completion of the IL-23 selection process which was

completed in June 2024.

For the ORKA-002 program,

the Company recognized research and development expenses related to the following milestones during the period from February 6, 2024 (inception)

to December 31, 2024:

a one-time, nonrefundable research initiation fee of $ 0.8 million and $ 1.5 million related to exercising its option

and achievement of development candidate.

The Company was responsible for the development costs incurred through the completion of the

IL-23 selection process which was completed in December 2024.

Pursuant to the Option Agreements,

during the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, the Company’s share

of development costs incurred for ORKA-001 program for the periods were nil and $ 0.8 million, respectively, which were recorded as research

and development expenses.

As of March 31, 2025 and December 31, 2024, nil and $ 2.8 million, respectively, related to ORKA-001 were included

in related party accounts payable and other current liabilities.

Pursuant to the Option Agreements,

the Company recognized $ 0.1 million and $ 4.2 million as research and development expenses for ORKA-002 program during the three months

ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, respectively.

As of March 31, 2025 and December

31, 2024, $ 0.1 million and $ 2.7 million, respectively, related to ORKA-002 were included in related party accounts payable and other current

For the three months ended

March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, the Company recognized $ 1.5 million and $ 5.0 million,

respectively, of expenses in connection with services provided by Paragon and Paruka under the Option Agreements.

The Company expenses the

service fees as the associated costs are incurred when the underlying services are rendered.

Such amounts are classified within research

and development expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

The Company concluded that

the rights obtained under the Option Agreements represent an asset acquisition whereby the underlying assets comprise in-process research

and development assets with no alternative future use.

The Option Agreements did not qualify as a business combination because substantially

all of the fair value of the assets acquired was concentrated in the exclusive license options, which represent a group of similar identifiable

The research initiation fee represents a one-time cost on a research program-by-research program basis for accessing research

services or resources with benefits that are expected to be consumed in the near term, therefore the amounts paid are expensed as part

of research and development costs immediately.

Amounts paid as reimbursements of ongoing development cost, monthly development cost fee

and additional development expenses incurred by Paragon due to work completed for selected targets prior to the effective date of the

Option Agreements that is associated with services being rendered under the related Research Programs are recognized as research and development

expense when incurred.

Commitment and Contingencies

April 2024, the Company entered into an operating lease agreement for the Company’s headquarters in Menlo Park, California, which

commenced on June 15, 2024 with an initial term of 39.5 months.

The Company leases office space under this noncancelable operating lease

Lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term.

In determining

the present value of lease payments, the Company used its incremental borrowing rate when measuring operating lease liabilities as discount

rates were not implicit or readily determinable.

As of September 30, 2024, the Company had $ 0.9

million of operating lease right-of-use assets, operating lease liability, current of $ 0.1 million, and operating lease liability, noncurrent

of $ 0.8 million on its condensed consolidated balance sheets.

As of September 30, 2024, the operating lease arrangement had a remaining

lease term of 36.0 months and a discount rate of 17.95 %.

For the three months ended September 30, 2024 and the period from February 6,

2024 (inception) to September 30, 2024, the Company recorded operating and variable lease expense of $ 0.1 and $ 0.2 million, respectively,

in general and administrative expenses in its condensed consolidated statements of operations and comprehensive loss.

following table presents the Company’s supplemental cash flow information related to leases (in thousands):

paid for amounts included in the measurement of lease liabilities

cash flow from operating leases

following table summarizes a maturity analysis of the Company’s operating lease liabilities showing the aggregate lease payments

as of September 30, 2024 (in thousands):

Fiscal year ending December 31,

2024 (remainder)

In April 2024, the Company

entered into an operating lease agreement for the Company’s headquarters in Menlo Park, California, which commenced on June 15,

2024 with an initial term of 39.5 months.

The Company leases office space under this noncancelable operating lease agreement.

Lease liabilities

are based on the net present value of the remaining lease payments over the remaining lease term.

In determining the present value of

lease payments, the Company used its incremental borrowing rate when measuring operating lease liabilities as discount rates were not

implicit or readily determinable.

As of March 31, 2025, the

operating lease arrangement had a remaining lease term of 30 months and a discount rate of 17.95 %.

For the three months ended March 31,

2025, the Company recorded operating and variable lease expense of $ 0.1 million in general and administrative expenses in its condensed

consolidated statement of operations and comprehensive loss.

The following table presents

the Company’s supplemental cash flow information related to leases (in thousands):

Cash paid for amounts included in the measurement of lease liabilities

The following table summarizes a maturity analysis

of the Company’s operating lease liabilities showing the aggregate lease payments as of March 31, 2025 (in thousands):

Year ending December 31,

2025 (remainder of the year)

Total undiscounted lease payments

3 unchanged sentences

Non-current portion of lease liability

In February 2025, the Company

entered into a lease agreement for office space in Waltham, Massachusetts.

This operating lease commenced on April 1, 2025 with an initial

term of 54 months.

The Company expects to pay approximately $ 1.6 million over the lease term.

Cell Line License Agreement

In March 2024, the Company

entered into the Cell Line License Agreement (the “Cell Line License Agreement”) with WuXi Biologics Ireland Limited (“WuXi

Under the Cell Line License Agreement, the Company received a non-exclusive, worldwide, sublicensable license to certain

of WuXi Biologics’ know-how, cell line, biological materials (the “WuXi Biologics Licensed Technology”) and media and

feeds to make, have made, use, sell and import certain therapeutic products produced through the use of the cell line licensed by WuXi

Biologics under the Cell Line License Agreement (the “WuXi Biologics Licensed Products”).

Specifically, the WuXi Biologics

Licensed Technology is used in certain manufacturing activities in support of the ORKA-001 and ORKA-002 programs.

In consideration for the

license, the Company agreed to pay WuXi Biologics a non-refundable license fee of $ 150,000 , which was recognized as a research and development

expense during the period from February 6, 2024 (inception) to December 31, 2024.

Additionally, to the extent that the Company manufactures

its commercial supplies of bulk drug product with a manufacturer other than WuXi Biologics or its affiliates, the Company is required

to make royalty payments to WuXi Biologics at a rate of less than one percent of net sales of WuXi Biologics Licensed Products manufactured

by the third-party manufacturer.

Pursuant to an amendment to the Cell Line License Agreement effective in November 2024, a provision was

added that permits the royalties owed under the agreement to be bought out on a product-by-product basis for a lump-sum payment.

The Cell Line License Agreement

will continue indefinitely unless terminated (i) by the Company upon six months’ prior written notice and its payment of all undisputed

amounts due to WuXi Biologics through the effective date of termination, (ii) by WuXi Biologics for a material breach by the Company that

remains uncured for 60 days after written notice, (iii) by WuXi Biologics if the Company fails to make a payment and such failure continues

for 30 days after receiving notice of such failure, or (iv) by either party upon the other party’s bankruptcy.

Legal Proceedings

The Company is not currently

party to any material legal proceedings.

At each reporting date, the Company evaluates whether or not a potential loss amount or a potential

range of loss is probable and reasonably estimable under the provisions of FASB ASC Topic 450, Contingencies (“ASC 450”).

The Company expenses as incurred the costs related to its legal proceedings.

Net Loss per Share

1 unchanged sentence

to stockholders were calculated as follows (in thousands, except share and per share data):

Three Months Ended

September 30,

Loss Allocation

Weighted Average Shares Outstanding

Loss Per Share – Basic and Diluted

Three Months Ended March 31, 2025

February 6, 2024 (Inception) to

March 31, 2024

Loss Allocation

Weighted Average Shares Outstanding

Loss Per Share – Basic and Diluted

Company Series A Preferred Stock (1)

$ ( 1,460.62 )

$ ( 6,077.13 )

Company Series B Preferred Stock (1)

weighted-average number of shares of as-converted Company Series A Preferred Stock used in the loss allocation was 477,196 and 184,462

for the three months ended September 30, 2024 and for the period from February 6, 2024 (inception) to September 30, 2024, respectively.

weighted-average number of shares of as-converted Company Series B Preferred Stock used in the loss allocation was 4,099,227 and 1,584,575

for the three months ended September 30, 2024 and for the period from February 6, 2024 (inception) to September 30, 2024, respectively.

For the computation of basic net loss per share

attributable to stockholders, the amount of weighted-average shares outstanding excludes all shares of unvested restricted common stock

as such shares are not considered outstanding for accounting purposes until vested.

The amount of weighted-average shares outstanding

includes the pre-funded warrants as the exercise price is negligible and these warrants are fully vested and exercisable.

The potential shares of common stock that were

excluded from the computation of diluted net loss per share attributable to stockholders for the periods presented because including them

would have had an anti-dilutive effect were as follows:

Three Months Ended

September 30,

(1) The weighted-average number of shares of as-converted Company Series B Preferred Stock used in the loss allocation was 11,428,129 for the three months ended March 31, 2025.

For the computation of basic

net loss per share attributable to stockholders, the amount of weighted-average shares outstanding excludes all shares of unvested restricted

common stock as such shares are not considered outstanding for accounting purposes until vested.

The amount of weighted-average shares

outstanding includes the pre-funded warrants as the exercise price is negligible and these warrants are fully vested and exercisable.

The potential shares of common

stock that were excluded from the computation of diluted net loss per share attributable to stockholders for the periods presented because

including them would have had an anti-dilutive effect were as follows:

Outstanding employee warrants to purchase common stock

1 unchanged sentence

Outstanding and issued common stock options

Related Party Transactions

Paragon and Paruka each beneficially own less

than 5 % of the Company’s capital stock through their respective holdings of Company Common Stock.

Fairmount beneficially owns more than 5 % of the

Company’s capital, currently has one representative appointed to the Board, and beneficially owns more than 5 % of Paragon.

appointed Paragon’s board of directors and has the contractual right to approve the appointment of any executive officers of Paragon.

following is a summary of related party accounts payable and other current liabilities (in thousands):

September 30,

Outstanding and issued warrant to Paruka

Party Transactions

Paragon and Paruka each beneficially

own less than 5% of the Company’s capital stock through their respective holdings of Company Common Stock.

Fairmount beneficially owns

more than 5% of the Company’s capital, currently has one representative appointed to the Board, and beneficially owns more than

5% of Paragon.

Fairmount appointed Paragon’s board of directors and has the contractual right to approve the appointment of any

executive officers of Paragon.

The following is a summary

of related party accounts payable and other current liabilities (in thousands):

Paragon reimbursable Option Agreements’ fees

Paragon milestone payments for Option Agreement

Paragon reimbursable other research expenses

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements